chp 5: Merchandising operations & multi step income statement

perpetual inventory system

track each purchase and sale of inventory; records continuously show inventory that should be on hand

periodic inventory system

does not track goods on hand; cogs is calculated at theh end of the accounting period due to a count

cog available for sale

beginning inventory + purchases = / ending inventory - cogs =

FOB Shipping point

buyer pays freight costs; ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller

FOB destination

seller pays freight costs; ownership of the goods remains with the seller until the goods reach the buyer

gross profit rate

gross profit / net sales =

profit margin

net income / net sales =

quality of earnings ratio

net cash provided by operating activities / net income