Ratio Analysis}

Selected information from Bigg Company's financial statements follows.

\section*{Required:}
1. Calculate the following ratios for 2017 and 2018:

(a) gross profit margin,

(b) operating margin,

(c) net profit margin,

(d) accounts receivable turnover, and

(e) average collection period. (Note: Round answers to two decimal places.)
2. CONCEPTUAL CONNECTION For each of the first three ratios listed above, provide a plausible explanation for the year-over-year changes. For example, why is the net profit margin higher or lower than it was the previous year?
3. CONCEPTUAL CONNECTION 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?

\section*{Problem

Transcribed Image Text:

Fiscal Year Ended December 31 2018 2017 (in thousands) 2016 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 Operating income 577,369 595,226 583,555 798,670 714,975 584,868 Other income (expenses) Net income 15,973 (5,720) (8,773) $ 814,643 $ 709,255 $ 576,095 At December 31 2018 2017 (in thousands) 2016 Accounts receivable $201,290 $195,427 $182.642 Less: Allowance for doubtful accounts Net accounts receivable (2,516) (2,736) (2.192) $198,774 $192,691 $180,450