To Get a Proper Picture of the Position of the Organization

question 61

Multiple Choice

To get a proper picture of the position of the organization, common-size statements and ratios should be compared to

• A) the organization's future historical performance.
• B) the leading competitor in the industry.
• C) the financial performance of the overall U.S. gross domestic production (GDP).
• D) the direct competitor least like the organization.
• E) industry-wide average trends.

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Definitions:

Bad Debt Expense

This is an expense account reflecting the cost of accounts receivable that a company does not expect to collect.

Credit Card Discounts

It refers to the reduction in the amount receivable from customers who make payments through credit cards, accounting for the fees charged by the credit card companies.

Operating Expenses

The costs associated with running the day-to-day operations of a business, such as rent, utilities, and salaries.

Gross Profit

The difference between net sales and the cost of goods sold, indicating the efficiency of a company's production process.