Problem 5-88B Ratio Analysis

Selected information from Small Company's financial statements follows.

Required:

1. Calculate the following ratios for 2012 and 2013. Round your answers to two decimal places.

2012 2013 a. Gross profit margin % % b. Operating margin % % c. Net profit margin % % d. Accounts receivable turnover

2. Conceptual Connection: For each of the first three ratios listed above provide a plausible explanation for any differences that exist. (For example, why is the net profit margin higher or lower than it was the previous year?)

The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor.

3. Conceptual Connection: Explain what each ratio attempts to measure. Make an assessment about Small Company based upon the ratios you have calculated.

The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor.

Are operations improving or worsening? Select Improving Worsening Item 11