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 Diusitech Inc. and make comments on its second-year performance as compared with its first-year performance The following shows Diusitech Inc.'s income statement for the last two years. The company had assets of $11,750 million in the first year and $18,796 million in the second year. Common equity was equal to $6,250 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. Diusitech Inc. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 1 5,000 1,723 200 1,923 Year 2 6,350 1,855 318 2,173 4,177 418 3,759 1,504 2,255 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 246 2,831 1,132 1,699