Module 5 Flashcards

1
Q

Merchandising Business:

A

 A business that sells merchandise, or goods
to customers / retailers
 Merchandise Inventory:
The merchandise a business sells to customers
 Types:
– Wholesaler: sells goods to retailers
– Retailer: sells goods to customers

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2
Q

Vendor:

A

The individual or business from whom a company purchases goods.

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3
Q

Cost of Goods Sold:

A

The cost of the merchandise inventory that

the business has sold to customers.

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4
Q

Gross Profit:

A

The excess of net Sales Revenue over Cost of
Goods Sold.
Sales Revenue – Cost of Goods Sold = Gross Profit

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5
Q

Operating Expenses:

A

Expenses other than the cost of goods sold incurred in the entity’s ongoing operations.

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6
Q

Liquidity:

A

A measure of how quickly an item can be converted into cash.

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7
Q

Purchase Discount:

A

A discount that businesses offer to purchases as an incentive for early payment.

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8
Q

Credit Terms:

A

The payment terms of purchase or sale as stated on the invoice

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9
Q

Purchase Return:

A

A situation in which sellers allow purchasers
to return merchandise that is defective,
damaged or otherwise unsuitable

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10
Q

Purchase Allowance:

A

A deduction from the sales price granted to
the purchaser as an incentive to keep the
goods that are not “as ordered”

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11
Q

Sales Return:

A

The product is returned and the customer receives his money back.

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12
Q

Purchase Agreement:

A

Specifies „Free on Board“ (FOB)
‐When title of the goods transfers to the purchaser
‐Who pays the freight costs

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13
Q

FOB Shipping Point:

A

The buyer takes ownership (title) of the
goods after the goods leave the seller‘s
place of business (shipping point)
• Usually the buyer pays the freight

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14
Q

Freight‐In:

A

The transportation cost to ship goods into
the purchaser‘s warehouse ‐> Freight on
purchased goods

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15
Q

FOB Destination:

A

The buyer takes ownership (title) of the
goods at the deleivery destination
point
• Usually the seller pays the freight

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16
Q

Freight‐Out:

A

The transportation cost to ship goods out
of the seller‘s warehouse and to the
customer -> Freight on goods sold

17
Q

Net Cost of Inventory Purchased:

A

Allows a business to determíne the actual cost of merchandise purchased.

18
Q

Sales Discount:

A

Reduction in the amount of revenue earned on sales for early payment
-> Example: 2/10, n/30

19
Q

Inventory Shrinkage:

A

The loss of inventory that occurs because

of theft, damage or errors.

20
Q

Selling Expenses:

A

Expenses related to marketing

and selling the company‘s products.

21
Q

Administrative Expenses:

A

Expenses incurred that

are not related to marketing the company‘s products.

22
Q

Operating Income:

A

Measures the results of the

entity‘s major ongoing activities.

23
Q

Other Income and Expenses:

A

Expenses that are
outside the normal day-to-day operations of a
business (Interest Expense, Sales Discounts
Forfeited, Gain/Loss on sales plant assets.

24
Q

Gross Profit Percentage:

A

Measures the profitability of each sales dollar above the cost of goods sold.

Gross profit percentage = Gross profit / Net sales revenue