Determine Cost of Goods Sold under a Periodic Inventory System. a periodic system does not determine cost of goods sold until Insert formula for Cost of Goods Sold using the Periodic Inventory System: Begin with Add: Subtotal is Subtract: This results in Compute and Analyze Gross Profit Rate and Profit Margin. EVALUATING PROFITABILITY Gross profit rate, calculated by A company can improve its profit margin ratio by A decline in a company's gross profit may be due Profit margin, calculated by The profit margin measures Consider the following scenario: Smith Company has had gross profit percentages of 2022% for the past 5 years. The current gross profit percentage is 14%. - What are some possible causes of this change in gross profit percentage? -What should the management of Smith Company do? - Suggest ways in which a company can improve its gross profit percentage. What types of business are more likely to have high profit margins? What types of business are more likely to have lower profit margins? The quality of earnings ratio - Is calculated as - Interpreting the quality of earnings ratio: - Measures greater than 1 suggest - Measures significantly below 1 suggest 2. Record Purchases under a Perpetual Inventory System. When is purchase of inventory for resale recorded _in Inventory account Documents used to make entries Cash purchases are recorded by an increase in and a decrease in Credit (on account) purchases are recorded by an increase in and an increase in Study examples in textbook. FREIGHT COSTS are Freight terms are (define each term) Which freight costs are added to cost of inventory? How is freight Costs Incurred by Seller recorded? Determine Cost of Goods Sold under a Periodic Inventory System. a periodic system does not determine cost of goods sold until Insert formula for Cost of Goods Sold using the Periodic Inventory System: Begin with Add: Subtotal is Subtract: This results in Compute and Analyze Gross Profit Rate and Profit Margin. EVALUATING PROFITABILITY Gross profit rate, calculated by A company can improve its profit margin ratio by A decline in a company's gross profit may be due Profit margin, calculated by The profit margin measures Consider the following scenario: Smith Company has had gross profit percentages of 2022% for the past 5 years. The current gross profit percentage is 14%. - What are some possible causes of this change in gross profit percentage? -What should the management of Smith Company do? - Suggest ways in which a company can improve its gross profit percentage. What types of business are more likely to have high profit margins? What types of business are more likely to have lower profit margins? The quality of earnings ratio - Is calculated as - Interpreting the quality of earnings ratio: - Measures greater than 1 suggest - Measures significantly below 1 suggest 2. Record Purchases under a Perpetual Inventory System. When is purchase of inventory for resale recorded _in Inventory account Documents used to make entries Cash purchases are recorded by an increase in and a decrease in Credit (on account) purchases are recorded by an increase in and an increase in Study examples in textbook. FREIGHT COSTS are Freight terms are (define each term) Which freight costs are added to cost of inventory? How is freight Costs Incurred by Seller recorded