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Explanation of Net Sales
Also called Net Revenue, and listed on the Income Statement, the Net Sales is the income generated by the company selling its products and/or services with any sales returns, refunds, or allowances subtracted.
Importance of Net Sales
Sales are typically a key income source for any company, and a upward trend is generally, but not always, a good sign. For example, if Net Sales of a company doubled from the year before, but the company’s expenses tripled, then this may actually be a bad sign. That is why Net Sales is used in many of the profitability performance ratios, like Gross Profit Margin, Operating Profit Margin, and Net Profit Margin.