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

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 Small Company based upon the ratios you have calculated. Are operations improving orworsening?

Fiscal Year Ended December 31 2009 (in thousands) 2010 2008 Gross sales $1,663,917 2,995 $1,697,195 3,055 $1,714,167 3,086 Less: Sales discounts Less: Sales returns and 2,496 $1,658,426 881,876 $ 776,550 482,050 294,500 3,534 $ 298,034 2,546 $1,691,594 891,027 S 800,567 496,958 $ 303,609 (3,036) $ 300,573 2,571 $1,708,510 860,512 $ 847,998 487 214 $ 360,784 (1,804) $ 358,980 allowances Net sales Cost of goods sold Gross profit Operating expenses Operating income Other income (expenses) Net income At December 31 2010 2009 in thousands) 2008 Accounts receivable Less: Allowance for doubtful $376,062 $365,109 $341,223 8,461 $367,601 5,971 $335,252 accounts 71,926 Net accounts receivable $293,183