(Solved by Humans)-Problem 5-73A RATIO ANALYSIS Selected information from Bigg Company’s financial statements...

Paper Details

Problem 5-73A  RATIO ANALYSIS Selected information from Bigg Company’s financial statements follows. Fiscal Year Ended December 31   2010 2009 (in thousands) 2008   Gross sales   $2,004,719 $1,937,021 $1,835,987   Less: Sales discounts   4,811 4,649 4,406   Less: Sales returns and           allowances             2,406           2,324           2,203   Net sales   $1,997,502 $1,930,048 $1,829,378   Cost of goods sold   621,463 619,847 660,955   Gross profit   $1,376,039 $1,310,201 $1,168,423   Operating expenses   577,369 595,226 583,555   Operating income   $  798,670 $  714,975 $  584,868   Other income (expenses)   15,973 (5,720) (8,773)   Net income   $  814,643 $  709,255 $  576,095         At December 31         2010 2009 (in thousands) 2008   Accounts receivable   $201,290 $195,427 $182,642   Less: Allowance for doubtful           accounts          2,516       2,736        2,192   Net accounts receivable   $198,774 $192,691 $180,450       Required: 1.    Calculate the following ratios for 2009 and 2010: a.      gross profit ratio b.     operating margin ratio c.      net profit margin ratio d.     accounts receivable turnover 2.    For each of the first three ratios listed above, provide a plausible explanation for any differences that exist (e.g., Why is the net profit margin higher or lower than it was the previous year?, etc.). 3.    Explain what each ratio attempts to measure. Make an assessment about Bigg Company based upon the ratios you have calculated. Are operations improving or worsening?