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Unformatted text preview: shows numerous steps in determining net income, including r activities. 5 Determine cost of goods sold under a periodic system. accounts to keep track of transactions that affect inventory. To sold, first calculate cost of goods purchased by adjusting purc discounts, and freight-in. Then calculate cost of goods sold by purchased to beginning inventory and subtracting ending inve 6 Explain the factors affecting profitability. Profitability is af measured by the gross profit rate, and by management's abilit measured by the profit margin ratio. 7 Identify a quality of earnings indicator. Earnings have high and transparent depiction of how a company performed. An in earnings is the quality of earnings ratio, which is net cash pro divided by net income. Measures above 1 suggest the compan accounting practices. Measures significantly below 1 might su aggressive accounting to accelerate the recognition of income...
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- Spring '11
- Revenue, Net Income, Generally Accepted Accounting Principles, step income statement, Study Objectives Chapter