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5. Profitability ratios help in the nalysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance

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5. Profitability ratios help in the nalysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Blur Corp. and make comments on its second-year performance as compared with its first-year performance. The following shows Blur Corp.'s income statement for the last two years. The company had assets of $9,400 miltion in the first year and $15,037 million in the second year. Common equity was equal to $5,000 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Blur Corp. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 5,080 4,000 1,610 1,495 160 1,864 1,655 3,216 2,345 188 2,782 2,157 Net Sales Operating costs except depreciation and amortization Depreciation and amortization Total Operating Costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 434 1,113 O Type here to search

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