Net credit sales
What are net credit sales?
A measurement of the sales a company makes to its customers on credit, minus the value of any returned items and allowances. Investors can use a firm's net credit sales when working out how much credit it's allowing its clients.
Where have you heard about net credit sales?
The term may arise when a company has a particularly loose approach to credit. In such circumstances, investors might have concerns about whether it's checking the payment records and credit ratings of its clients closely enough.
What you need to know about net credit sales.
To work out a company's net credit sales, use the following calculation: credit sales - sales returns - sales allowances = net credit sales.
Breaking this equation down, credit sales refer to any sales made by a company that don't need to be paid by their customers immediately. Clients buying on credit instead pay what they owe within a specified period of time.
Sales returns refer to any goods which are returned by a customer, perhaps because of a fault.
Sales allowances refer to any deductions made to the price of goods when they're found to be damaged or faulty but the customer decides to keep them.