The year 2017 had been a great year for Blue Sea Enterprises Limited. The net profit of the company has increased by almost 70% compared to the previous year. The management has declared an increased dividend on its equity shares. The comparative financials of the company for the years 2016 and 2017 are given as follows: 

You are required to:

1. Calculate cash operating margin, operating margin, pre­tax margin and net margin for the years 2016 and 2017.

2. Has the performance of the company really improved? Analyse the financial performance using the above ratios and expense ratios.

3. Calculate the dividend pay­out ratio for the two years. Is the higher divided justified for the year 2017?

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Particulars Sales Other operating income Total Cost of goods sold Employee cost Selling and Administrative expenses Depreciation Interest (Net) Profit before tax and extra-ordinary items Extra-ordinary items Profit before tax Tax Profit after tax Dividend Retained earnings (in Million) 2017 1,020 58 1,078 640 90 160 44 64 80 62 142 50 92 45 47 2016 872 47 919 502 85 122 40 86 84 0 84 27 57 30 27