Selected information from Small Company€™s financial statements follows.

Required:
1. Calculate the following ratios for 2010 and 2011:
(a) Gross profit margin,
(b) Operating margin,
(c) Net profit margin,
(d) Accounts receivable turnover.
2. For each of the first three ratios listed above provide a plausible explanation for any differences that exist. (For example, why is the net profit margin higher or lower than it was the previous year?)
3. Explain what each ratio attempts to measure. Make an assessment about Small Company based upon the ratios you have calculated. Are operations improving or worsening?

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Fiscal Year Ended December 31 2010 in thousands) 2011 Gross sales Less: Sales discounts Less: Sales returns and allowances (2,995) 3,055) (3,086) Net sales Cost of goods sold Gross profit Operating expenses Operating income Other income (expenses Net income 1,658,426 $1,69194 $1,708,510 $ 776,550 800,567 847,998 $ 294,500 303,609 360,784 $ 298,034 300,573 358,980 At December 31 496 881,876 482,050 3,534 5461 891,027 496,958 3,036 2,571) 860,512 487,214 1,804) 73 $ 358,980 2011 Accounts receivable Less: Allowance for doubtful accounts Net accounts receivable 2010 in thousands) 365,109 71,926] 2009 341,223 $335,252 376,062 3 3 (8,461) (5,971) $367,601 $293,183