Using the formula sheet and Income Statement for FRS, solve the following ratios. I have given you the interpretation of each ratio - in other words, what it's purpose is and what it is telling you about the company's performance. 1. Gross Margin Ratio Interpretation: How much of each dollar is left after subtracting COGS from sales. It is your Gross Profit Margin before operating expenses have been deducted 2. Net Income Ratio Interpretation: How much of each dollar earned by the company is pretax profit. Measures the profitability of your company and is used primarily internally 3. Operating Expense Ratio Interpretation: a measure of your operational financial efficiency. How much it costs to market or sell products vs. how much income they generate. A cost/benefit analysis 4. Returns and Allowances Ratio Interpretation: Can be a measure of customer dissatisfaction. You need to determine the reason they are returning items. Are your return policies too lenient? Do you have low quality or obsolete products. Compare year to year to make sure the rate isn't increasing. It also depends on the size of the retailer - A 2% return rate for Walmart is very acceptable but a 2% return rate for a small mom and pop operator will likely put them out of business. 5. Inventory Turnover Ratio Interpretation: Determines how often you are selling your total inventory annually. A turn over rate of 2 times means that you are selling all of your inventory every 6 months. Is this good? Again, it depends on the business. If you own a flower shop - this is terrible and you won't stay in business. However, if you own a high end jewelry store, this is probably acceptable. If you need to boost your inventory turnover, then you will implement strategies such as price incentives to get people to buy more frequently. 6. IFRS has a total investments of $1,000,000, then its Return on Investment is: Using the formula sheet and Income Statement for FRS, solve the following ratios. I have given you the interpretation of each ratio - in other words, what it's purpose is and what it is telling you about the company's performance. 1. Gross Margin Ratio Interpretation: How much of each dollar is left after subtracting COGS from sales. It is your Gross Profit Margin before operating expenses have been deducted 2. Net Income Ratio Interpretation: How much of each dollar earned by the company is pretax profit. Measures the profitability of your company and is used primarily internally 3. Operating Expense Ratio Interpretation: a measure of your operational financial efficiency. How much it costs to market or sell products vs. how much income they generate. A cost/benefit analysis 4. Returns and Allowances Ratio Interpretation: Can be a measure of customer dissatisfaction. You need to determine the reason they are returning items. Are your return policies too lenient? Do you have low quality or obsolete products. Compare year to year to make sure the rate isn't increasing. It also depends on the size of the retailer - A 2% return rate for Walmart is very acceptable but a 2% return rate for a small mom and pop operator will likely put them out of business. 5. Inventory Turnover Ratio Interpretation: Determines how often you are selling your total inventory annually. A turn over rate of 2 times means that you are selling all of your inventory every 6 months. Is this good? Again, it depends on the business. If you own a flower shop - this is terrible and you won't stay in business. However, if you own a high end jewelry store, this is probably acceptable. If you need to boost your inventory turnover, then you will implement strategies such as price incentives to get people to buy more frequently. 6. IFRS has a total investments of $1,000,000, then its Return on Investment is