Cho has been asked to calculate the profitability ratios of Cold Goose Metal Works, Inc. and make comments on its second$-$year

performance as compared to its first$-$year performance.

The following shows Cold Goose's income statement for the last two years. The company had assets of $$4,700,000$ in the first year and

$$7,518,400$ in the second year. Common equity was equal to $$2,500,000$ in the first year, $100\%$ of earnings were paid out as dividends

in the first year, and the firm did not issue new stock in the second year.

Given the income statements, calculate the profitability ratios of Cold Goose Metal Works, Inc.

Profitability Ratio

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 company earned a net income of $$0\mathrm{.}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.

An increase in the return on assets ratio implies an increase in the assets a firm owns.

If a company issues new common shares but its net income does not increase, return on common equity will increase.