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Definition of Gross sales

Gross Sales Image 1

Gross sales

The total sales recorded prior to sales discounts and returns.



Related Terms:

NET SALES (revenue)

The amount sold after customers’ returns, sales discounts, and other allowances are taken away from
gross sales. (Companies usually just show the net sales amount on their income statements, omitting returns, allowances, and the like.)


Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional
sales contract.


Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.


Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.


Days' sales outstanding

Average collection period.


Domestic International Sales Corporation (DISC)

A U.S. corporation that receives a tax incentive for
export activities.


Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for exporting U.S.-produced goods.


Gross Sales Image 2

Gross domestic product (GDP)

The market value of goods and services produced over time including the
income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S.
residents and corporations overseas.


Gross interest

Interest earned before taxes are deducted.


Gross national product (GNP)

Measures and economy's total income. It is equal to GDP plus the income
abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.


Gross profit margin

gross profit divided by sales, which is equal to each sales dollar left over after paying
for the cost of goods sold.


Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.


Price/sales ratio (PS Ratio)

Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.


Sales charge

The fee charged by a mutual fund when purchasing shares, usually payable as a commission to
marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It
represents the difference, if any, between the share purchase price and the share net asset value.


Sales forecast

A key input to a firm's financial planning process. External sales forecasts are based on
historical experience, statistical analysis, and consideration of various macroeconomic factors.


Sales-type lease

An arrangement whereby a firm leases its own equipment, such as IBM leasing its own
computers, thereby competing with an independent leasing company.


Gross Sales Image 3

GROSS PROFIT

The profit a company makes before expenses and taxes are taken away.


NUMBER OF DAYS SALES IN RECEIVABLES

(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet.


RATIO OF NET INCOME TO NET SALES

A ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula:
(Net income) / (Net sales)


RATIO OF NET SALES TO NET INCOME

A ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way:
(Net sales) / (Net income)


Cost of sales

The manufacture or purchase price of goods sold in a period or the cost of providing a service.


Gross profit

The difference between the price at which goods or services are sold and the cost of sales.
Income The revenue generated from the sale of goods or services.


Sales mix

The mix of product/services offered by the business, each of which may be aimed at different customers, with each product/service having different prices and costs.


Gross profit

The result of subtracting cost of goods sold from sales. Synonymous with gross margin.


Sales

Amounts earned by the company from the sale of merchandise or services; often used interchangeably with the term revenue.


Sales discounts

A contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales.


Sales journal

A journal used to record the transactions that result in a credit to sales.


Gross Sales Image 4

Sales returns

A contra account that offsets revenue. It represents the amount of sales made that were later returned.


gross margin, or gross profit

This first-line measure of profit
equals sales revenue less cost of goods sold. This is profit before operating
expenses and interest and income tax expenses are deducted. Financial
reporting standards require that gross margin be reported in
external income statements. gross margin is a key variable in management
profit reports for decision making and control. gross margin
doesn’t apply to service businesses that don’t sell products.


return on sales

This ratio equals net income divided by sales revenue.


sales mix

the relative combination of quantities of sales of the various products that make up the total sales of a company


sales value at split-off allocation

a method of assigning joint cost to joint products that uses the relative sales values of the products at the split-off point as the proration basis; use of this method requires that all joint products
are salable at the split-off point


Gross margin

Revenues less the cost of goods sold.


Net sales

Total revenue, less the cost of sales returns, allowances, and discounts.


Sales allowance

A reduction in a price that is allowed by the seller, due to a problem
with the sold product or service.


Sales discount

A reduction in the price of a product or service that is offered by the
seller in exchange for early payment by the buyer.


Sales value at split-off

A cost allocation methodology that allocates joint costs to joint
products in proportion to their relative sales values at the split-off point.


percentage of sales models

Planning model in which sales forecasts are the driving variables and most other variables are
proportional to sales.


Gross Domestic Product

Total output of final goods and services produced within a country during a year.


Gross National Product

Total output of final goods and services produced by a country's citizens during a year.


Sales Tax

A tax levied as a percentage of retail sales.


Gross Pay

The amount of earnings due to an employee prior to tax and other deductions.


Gross Profit

Revenue less cost of goods sold.


Gross Profit Margin

gross profit divided by revenue.


Sales Revenue Revenue recognized from the sales of products as opposed to the provision of

services.


Sales-type Lease

Lease accounting used by a manufacturer who is also a lessor. Up-front gross
profit is recorded for the excess of the present value of the lease payments to be received across
a lease term over the cost to manufacture the leased equipment. Interest income also is recognized
on the lease receivable as it is earned over the lease term.


INCOME STATEMENT

An accounting statement that summarizes information about a company in the following format:
Net sales
– Cost of goods sold
--------------------
gross profit
– Operating expenses
--------------------
Earnings before income tax
– Income tax
--------------------
= Net income or (Net loss)
Formally called a “consolidated earnings statement,” it covers a period of time such as a quarter or a year.


accrual-basis accounting

Well, frankly, accrual is not a good descriptive
term. Perhaps the best way to begin is to mention that accrual-basis
accounting is much more than cash-basis accounting. Recording only the
cash receipts and cash disbursement of a business would be grossly
inadequate. A business has many assets other than cash, as well as
many liabilities, that must be recorded. Measuring profit for a period as
the difference between cash inflows from sales and cash outflows for
expenses would be wrong, and in fact is not allowed for most businesses
by the income tax law. For management, income tax, and financial
reporting purposes, a business needs a comprehensive record-keeping
system—one that recognizes, records, and reports all the assets and liabilities
of a business. This all-inclusive scope of financial record keeping
is referred to as accrual-basis accounting. Accrual-basis accounting
records sales revenue when sales are made (though cash is received
before or after the sales) and records expenses when costs are incurred
(though cash is paid before or after expenses are recorded). Established
financial reporting standards require that profit for a period
must be recorded using accrual-basis accounting methods. Also, these
authoritative standards require that in reporting its financial condition a
business must use accrual-basis accounting.


product cost

This is a key factor in the profit model of a business. Product
cost is the same as purchase cost for a retailer or wholesaler (distributor).
A manufacturer has to accumulate three different types of production
costs to determine product cost: direct materials, direct labor, and
manufacturing overhead. The cost of products (goods) sold is deducted
from sales revenue to determine gross margin (also called gross profit),
which is the first profit line reported in an external income statement
and in an internal profit report to managers.


profit ratios

Ratios based on sales revenue for a period. A measure of
profit is divided by sales revenue to compute a profit ratio. For example,
gross margin is divided by sales revenue to compute the gross margin
profit ratio. Dividing bottom-line profit (net income) by sales revenue
gives the profit ratio that is generally called return on sales.


Breakeven point

The sales level at which a company, division, or product line makes a
profit of exactly zero, and is computed by dividing all fixed costs by the average
gross margin percentage.


 

 

 

 

 

 

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