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Finance Dictionary and Glossary of Investment Terms
Total dollar amount collected for goods and services provided. While payment is not necessary for recognition of sales on company financial statements, there are strict accounting guidelines stating when sales can be recognized. The basic principle is that a sale can only be recognized when the transaction is already realized, or can be quite easily realized. This means that the company should have already received a payment, or the chances of receiving a payment is high. In addition, delivery of the good or service should have taken place for the sale to be recognized.
This represents all net sales of the corporation plus any other revenues associated with the main operations of the business (or those labeled as operating revenues). It does not include dividends, interest income, or non-operating income. Sales are an important item in assessing the prospects of any public company. Although subject to some finagling, sales typically are not as iffy as net income, and tell you just how much of its goods and services the company is selling. Thus, the rate of sales increase is an important indicator of how fast a company is growing. Sales can be analyzed in different ways for different industries. In retailing, for instance, analysts like to look at the sales-per-square-foot ratio as well as ""same-store sales."" Investors are sometimes wary of firms that increase profits without increasing sales, as was the case with IBM for awhile during its turnaround, because cost-cutting cannot go on forever. In recent years, analysts have paid increasing attention to sales, particularly by calculating the Price/Sales ratio.