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The following information was drawn from the annual reports of two companies. Company A Company B...

Question:

The following information was drawn from the annual reports of two companies.

Company ACompany B
Sales revenue$1,000$2,000
Cost of goods sold$(600)$(1100)
Gross margin$400$900
Operating expenses$(220)$(700)
Operating income$180$200
Gain on sale of equipment$150$0
Net Income$330$200

Based on this information, Company B's return on sales is:

a. 55%.

b. 45%.

c. 35%.

d. 10%.

Return on Sales:

Return on sale is a financial ratio that compares the operating income of the company with the total sales revenue. The formula is:

{eq}Return \ on \ sales \ = \ \dfrac{Operating \ income}{Sales \ revenue} \ \times \ 100 {/eq}

Answer and Explanation: 1

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The company B's return on sales is 10% (d)

The calculation is shown below.

{eq}Return \ on \ sales \ = \ \dfrac{Operating \ income}{Sales \ revenue}...

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Sales Returns & Allowances Journal Entries

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Chapter 7 / Lesson 33
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Sales returns and allowances must be properly tracked by accounting using journal entries. Review the process for recording sales returns and allowances with examples.


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