Exam 1 - Insights into Profitability

Question 1

Net Sales

Answer 1

Actual money recieved after discounts and adjustments

Question 2

COGS

Answer 2

Cost of Merchandise + Freight from Manufacturer

Question 3

Freight

Answer 3

• To Branch Warehouse

- Direct Ships

Question 4

Cost of Merchandise

Answer 4

• Trade Discounts
• Trade Pricing
• Commodity Pricing
• Deviations from the Price of the Merchandise

Question 5

Gross Margin

Answer 5

Aka: Margin

= selling price - COGS

Question 6

% Gross Margin

Answer 6

[(Selling Price - COGS)/Selling Price] * 100

Question 7

Expenses

Answer 7

• Cash outflows
• Depreciation of an Asset
• Incurrence of a Liability

Question 8

EBITDA

Answer 8

Earnings Before:

• Interest
• Taxes
• Depreciation
• Ammortization
• Sometimes referred to as “Operating Margin”
• Has some limitations

Question 9

Working Capital

Answer 9

Inventory, Receivables, Cash

Question 10

Profitability

Answer 10

The ability to earn profit

How well we use investments such as assets to produce profit

Question 11

Return on Investment (ROI)

Answer 11

(Revenue - Expenses)/Assets

Return/Investment

-Takes into account and must consider the source of the investment

Question 12

Debt

Answer 12

Loan to the company with an obligation to pay interest

Question 13

Equity

Answer 13

Ownership investment in the company with a transfer of owenership (also includes funds left in the company)

Question 14

RONA

Answer 14

Return on Net Assets

**minus out current liabilities