Note: only partial balance sheet information provided; do not "average" balance sheet data when calculating ratios; the 20X1 and 20X2 ratio columns are for your convenience when answering the questions and will not be graded Knicherdoodles, Inc. 20X1 20X2 Industry averages ratios (360 day year) 20X1 20X2 Sales (all credit) $740 $785 $ Current ratio 4.1 ? ? COGS 430 440 Quick ratio 2.1 ? ? Operating Exp (Excluding Depreciation) 150 160 A/R collection period 47 ? ? Interest 33 35 Inventory turnover 2.1 ? ? Dividends 16 17 Total asset turnover 0.35 ? ? Depreciation Expense 100 110 Fixed asset turnover 0.45 ? ? ? Cash 70 75 Gross margin 41.20% ? ? Accounts receivables 563 502 Operating margin 11.10% ? ? ? Accounts payable 390 405 Times interest earned 4.3x ? 7 ? Inventory 662 640 340 410 Long-term debt Net fixed assets 1,680 1,413 Total Assets 2,960 2,983 Common stock 700 235 Tax rate 35% 35% An analyst's report concludes that "Even though Knickerdoodle's management is good at controlling operating cost, profitability falls short of industry norms because the firm's production costs are simply too high." Do you agree with this statement? Why or why not? Yes, operating costs are OK but production costs are too high No, production cost and operating costs are too high No, Production cost and operating costs are about right No, Production costs are OK but the operating costs are too high