Selected information from Bigg Company's financial statements follows: Fiscal Year Ended December 31 2019 2018 (in thousands) 2017 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 577,369 595,226 583,555 Operating income $798,670 $714,975 $584,868 Other income (expenses) 15,973 (6,140) (8,773) Net income $814,643 $708,835 $576,095 At December 31 2019 2018 (in thousands) 2017 Accounts receivable $201,290 $195,427 $182,642 Less: Allowance for doubtful accounts 2,516 2,736 2,192 Net accounts receivable $198,774 $192,691 $180,450 Required: 1. Calculate the following ratios for 2018 and 2019. Round your answers to two decimal places. 2018 2019 a. Gross profit margin ? % ? % b. Operating margin ? % ? % c. Net profit margin ? % ? % d. Accounts receivable turnover ?
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Selected information from Bigg Company's financial statements follows:
| Fiscal Year Ended December 31 | ||||||
| 2019 | 2018 (in thousands) |
2017 | ||||
| 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 | 577,369 | 595,226 | 583,555 | |||
| Operating income | $798,670 | $714,975 | $584,868 | |||
| Other income (expenses) | 15,973 | (6,140) | (8,773) | |||
| Net income | $814,643 | $708,835 | $576,095 | |||
| At December 31 | ||||||
| 2019 | 2018 (in thousands) |
2017 | ||||
| $201,290 | $195,427 | $182,642 | ||||
| Less: Allowance for doubtful accounts | 2,516 | 2,736 | 2,192 | |||
| Net accounts receivable | $198,774 | $192,691 | $180,450 |
Required:
1. Calculate the following ratios for 2018 and 2019. Round your answers to two decimal places.
| 2018 | 2019 | ||||
| a. | Gross profit margin | ? | % | ? | % |
| b. | Operating margin | ? | % | ? | % |
| c. | Net profit margin | ? | % | ? | % |
| d. | Accounts receivable turnover | ? | ? |
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