5. Profitability ratios Profitability ratios help in the analysis 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 St. McStanky Beer Co. and make comments on its second-year performance as compared to its first-year performance. The following shows St. McStanky Beer Co.'s income statement for the last two years. The company had assets of $8,225 million in the first year and $13,157 million in the second year. Common equity was equal to $4,375 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. St. McStanky Beer Co. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 4,445 1,120 Year 1 3,500 1,040 222 140 1,180 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 1,342 3,103 2,320 419 302 2,684 1,074 1,610 2,018 807 1,211 Calculate the profitability ratios of St. McStanky Beer Co. in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Year 2 69.81% 36.22% Value Year 1 66.29% 46.71% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 12.24% 14.72% 27.68% 23.58%