Shrinkage Is Calculated Using Which of These Formulas

question 15

Multiple Choice

Shrinkage is calculated using which of these formulas?

• A) Total number of units on hand ÷ Average daily units used
• B) Cost of goods sold ÷ Average inventory
• C) Net income ÷ Inventory
• D) (Total book value - Observed value) ÷ Inventory

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Definitions:

Net Income

The earnings of a company after all expenses, including taxes and operational costs, have been deducted from revenues, reflecting the company's profit.

Accounts Receivable

The amount that debtors are required to pay to a company for the goods or services they have received but have not yet compensated for.

Accounts Payable

Obligations of a business to pay for goods or services that have been delivered but not yet paid for.

Inventory

The total amount of goods and materials a company holds for the purpose of resale or production, including raw materials, work-in-progress, and finished goods.