Question

After a company has calculated all earnings from the selling of goods, providing services, or performing business activities, it subtracts ______ to determine the net sales.

A) Cost of Goods Sold (COGS)
B) Operating Expenses
C) Gross Profit
D) Net Income

Answer 1

To determine net sales, a company subtracts Cost of Goods Sold (COGS) from its total revenues. Net sales reflect the earnings that will be applied to cover operating expenses, which are crucial for assessing the company's profitability.

Step-by-step explanation:

After a company has calculated all earnings from the selling of goods, providing services, or performing business activities, it subtracts Cost of Goods Sold (COGS) to determine the net sales. This is a part of the income statement where a company reports the total revenues minus the COGS, which represents the direct costs associated with the production of the goods sold by the company.

These costs include, but are not limited to, materials and direct labor. Net sales is a critical figure as it represents the revenues that a company will use to cover its operating expenses and assess its profitability.

After a company has calculated all earnings from the selling of goods, providing services, or performing business activities, it subtracts Cost of Goods Sold (COGS) to determine the net sales.

Gross Profit is calculated by subtracting the COGS from the net sales. Operating Expenses are subtracted from Gross Profit to determine the Net Income.

A) Cost of Goods Sold (COGS) is correct.