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 Spandust Industries Inc. and make comments on its second-year performance as compared with its first-year performance. The following shows Spandust Industries Inc's income statement for the last two years. The company had assets of $9.400 million 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 eamings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. 160 Spandust Industries Inc. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 5,080 4,000 Operating costs except depredation and amortization 1,365 1,268 Depredation and amortization 254 Total Operating costs 1,619 1,428 Operating Income (or EBIT) 3,461 2,572 Less: Interest 346 334 Earnings before taxes (EBT) 3,115 2.238 Less: Taxes (40%) 1,246 895 Net Income 1,869 1,343 Calculate the profitability ratios of Spandust Industries Inc. places. the following table Convert all calculations to a percentage rounded to two decimal Ratio Value Year 2 Year 1 64.30% 36.79% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 14.2996 26.56% 23.02% Decision makers and analysts look deeply into profitability ratios to identify trends in a company's probaty. Profitability to give insights into both the survivability of a company and the benefits that shareholders receive. Identity which of the following statements are true about profitability ratios. Check all that apply. O Aligher operating margin than the industry average indicates the lower operating costs, the product pricing, or both IT a company's operating margin increases but its profit margin decreases could mean that the company padre in interest O Minore in the remonstration is an increase in the firm w a com comes but is not income detto che