| Acid-test ratio | Ratio used to assess a company's ability to settle its current debts with its most liquid assets; defined as quick assets (cash, short-term investments, and current receivables) divided by current liabilities.
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| Cash discount | Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period.
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| Cost of goods available for sale | Beginning inventory plus net purchases.
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| Cost of goods sold | Cost of inventory sold to customers during a period; also called cost of sales.
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| Credit memorandum | Notification that the sender has credited the recipient's account in the sender's records.
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| Credit period | Time period that can pass before a customer's payment is due.
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| Credit terms | Description of the amounts and timing of payments that a buyer agrees to make in the future.
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| Debit memorandum | Notification that the sender has debited the recipient's account in the sender's records.
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| Discount period | Time period in which a cash discount is available and the buyer can make a reduced payment.
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| EOM | Abbreviation for end of month; used to describe credit terms for credit transactions.
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| FOB | Abbreviation for free on board; the point when ownership of goods passes to the buyer; FOB shipping point (or factory) means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to carrier; FOB destination means the seller pays shipping costs and buyer accepts ownership of goods at the buyer's place of business.
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| General and administrative expenses | Expenses that support the operating activities of a business.
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| Gross margin | (See gross profit.)
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| Gross margin ratio | Gross margin (net sales minus cost of goods sold) divided by net sales; also called gross profit ratio.
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| Gross method | Method of recording purchases at the full invoice price without deducting any cash discounts.
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| Gross profit | Net sales minus cost of goods sold; also called gross margin.
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| Inventory | Goods a company owns and expects to sell in its normal operations.
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| List price | Catalog (full) price of an item before any trade discount is deducted.
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| Merchandise | (See merchandise inventory.)
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| Merchandise inventory | Goods that a company owns and expects to sell to customers; also called merchandise.
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| Merchandiser | Entity that earns net income by buying and selling merchandise.
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| Multiple-step income statement | Income statement format that shows subtotals between sales and net income, categorizes expenses, and also often reports the details of net sales and expenses.
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| Periodic inventory system | Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and costs of goods available.
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| Perpetual inventory system | Method that maintains continuous records of the cost of inventory available and the cost of goods sold.
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| Purchase discount | Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period.
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| Retailer | Intermediary that buys products from manufacturers or wholesalers and sells them to consumers.
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| Sales discount | Term used by a seller to describe a cash discount granted to buyers who pay within the discount period.
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| Selling expenses | Expenses of promoting sales, such as displaying and advertising merchandise, making sales, and delivering goods to customers.
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| Service company | Organization that provides services instead of tangible products.
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| Shrinkage | Inventory losses that occur as a result of theft or deterioration.
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| Single-step income statement | Income statement format that includes cost of goods sold as an expense and shows only one subtotal for total expenses.
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| Supplementary records | Information outside the usual accounting records; also called supplemental records.
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| Trade discount | Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers.
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| Wholesaler | Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers.
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