P1-7. Reading an Income Statement Mattel, Inc. is a U.S.-based toy company with about half of Mattel, Inc its revenues from sales outside North America. Its globally-recognized names include Barbie Fisher-Price, Hot Wheels, and American Girl, and because of its licensing arrangements with Disney, Viacom, and Warner Brothers, many of its products are based on well-known charac ters, such as Winnie the Pooh, SpongeBob SquarePants, and Batman. Its income statements for the years ended 2014, 2013, and 2012 appear in the exhibit below as the basis for the fol- lowing questions. (Note that the company reports in thousands of U.S. dollars.) Required: a. What is Mattel's largest expense? b. Calculate the gross margin percentaefor each of the three ye might this ratio be useful? What is Mattel's second largest expense? What kinds of specific costs might be included in that line of the income statement? Although you don't have a balance sheet, how can you tell from the income statement that Mattel has borrowed from banks and other lenders? d. e. Compare changes in Mattel's net income with changes in its profit marger the three years. MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year 2012 (In thousands, except per share amounts) Net sales.. 20142013 $6,023,819 $6,484,892 $6,420,881 3,022,797 3,006,009 3,011,684 3,001,022 3,478,883 3,409,197 750,205 1,560,575 653,7141,168,103 1,021,015 733,243 Other selling and administrative expenses1,614,065 717,803 1,670,379 Advertising and promotion expenses. Interest expense.... Interest (income).. Other non-operating (income), net. Income before income taxes ' , . , , . .. . . . . . . Provision for income taxes. 79,271 (7,382) (5,085) 78,505 (5,555) (3,975) 910 1099,128 88,835 (6,841) (6,024) 945,045 168,581 88,036 195,184