Answer :
To answer the question, let's break down the components and understand the definitions clearly using fundamental accounting principles.
1. Sales Revenue: This is the total amount of money generated from selling goods or services.
2. Cost of Goods Sold (COGS): This is the direct cost attributable to the production of goods sold by a company. This includes the cost of the materials and labor directly used to create the good.
When calculating Net Profit, it's important to consider all aspects of business expenses. The formula for Net Profit is:
[tex]\[ \text{Net Profit} = \text{Sales Revenue} - \text{Cost of Goods Sold} - \text{Operating Expenses} - \text{Taxes} \][/tex]
From this, we can see that Net Profit is derived from subtracting not just the Cost of Goods Sold, but also the Operating Expenses (such as rent, utilities, salaries, and other day-to-day expenses) and Taxes from the Sales Revenue.
In the given statement, "Sales revenue less cost of goods sold equals net profit," it suggests that simply subtracting the Cost of Goods Sold from the Sales Revenue will give you the Net Profit. However, this overlooks other significant deductions like Operating Expenses and Taxes.
Hence, the statement is incomplete and incorrect because it does not account for the full range of necessary subtractions to arrive at the Net Profit.
Therefore, the statement is False.
1. Sales Revenue: This is the total amount of money generated from selling goods or services.
2. Cost of Goods Sold (COGS): This is the direct cost attributable to the production of goods sold by a company. This includes the cost of the materials and labor directly used to create the good.
When calculating Net Profit, it's important to consider all aspects of business expenses. The formula for Net Profit is:
[tex]\[ \text{Net Profit} = \text{Sales Revenue} - \text{Cost of Goods Sold} - \text{Operating Expenses} - \text{Taxes} \][/tex]
From this, we can see that Net Profit is derived from subtracting not just the Cost of Goods Sold, but also the Operating Expenses (such as rent, utilities, salaries, and other day-to-day expenses) and Taxes from the Sales Revenue.
In the given statement, "Sales revenue less cost of goods sold equals net profit," it suggests that simply subtracting the Cost of Goods Sold from the Sales Revenue will give you the Net Profit. However, this overlooks other significant deductions like Operating Expenses and Taxes.
Hence, the statement is incomplete and incorrect because it does not account for the full range of necessary subtractions to arrive at the Net Profit.
Therefore, the statement is False.
