Blur Corp. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 6,350 5,000 1,120 1,040 318 200 Operating costs except depreciation and amortization Depreciation and amortization Total Operating Costs Operating Income (or EBIT) 1,438 1,240 4,912 3,760 Less: Interest 663 395 Earnings before taxes (EBT) 4,249 3,365 Less: Taxes (40%) 1,700 1,346 Net Income 2,549 2,019 Calculate the profitability ratios of Blur Corp. in the following table. Convert all calculations to a percentage rounded to two decimal places. Value Ratio Year 2 Year 1 Operating margin 75.20% Net profit margin 40.14% Return on total assets 17.18% Return on common equity 32.30% Basic earning power 26.13% Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivability of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitability ratios. Check all that apply. If a company has a net profit margin of 10%, it means that the ny earned a net income of $0.10 for each dollar of sales. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. U An increase in a company's earnings means that the net profit margin is increasing. If a company issues new common shares but its net income does not increase, return on common equity will increase. Blur Corp. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 6,350 5,000 1,120 1,040 318 200 Operating costs except depreciation and amortization Depreciation and amortization Total Operating Costs Operating Income (or EBIT) 1,438 1,240 4,912 3,760 Less: Interest 663 395 Earnings before taxes (EBT) 4,249 3,365 Less: Taxes (40%) 1,700 1,346 Net Income 2,549 2,019 Calculate the profitability ratios of Blur Corp. in the following table. Convert all calculations to a percentage rounded to two decimal places. Value Ratio Year 2 Year 1 Operating margin 75.20% Net profit margin 40.14% Return on total assets 17.18% Return on common equity 32.30% Basic earning power 26.13% Decision makers and analysts look deeply into profitability ratios to identify trends in a company's profitability. Profitability ratios give insights into both the survivability of a company and the benefits that shareholders receive. Identify which of the following statements are true about profitability ratios. Check all that apply. If a company has a net profit margin of 10%, it means that the ny earned a net income of $0.10 for each dollar of sales. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. U An increase in a company's earnings means that the net profit margin is increasing. If a company issues new common shares but its net income does not increase, return on common equity will increase
