2016-12-02 00:00:00 Finance and Accounting English Discover how net sales is a financial figure on a company's income statement that indicates how well a company is selling its products. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/03/08214717/boutique-shop-owner-completes-sale.jpg What Is Net Sales?

What Is Net Sales?

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Net sales is gross sales minus all sales returns, allowances, and discounts. It appears in a company’s income statement and is a more accurate reflection of a company’s sales performance.

For example, company A has total sales revenue of $100,000. The total amount of customer returns is $10,000. The company also sold some damaged products at discounted prices. The total sales allowance came to $5,000. Therefore, the net sales of company A is $100,000 – $10,000 – $5,000 = $85,000.

A company with high gross sales but low net sales may be discounting its prices too much. If the low net sales is the result of a high amount of returns, the company may need to investigate the reason why customers are returning the products.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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