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 Stay Swift Corp. and make comments on its second-year performance as compared to its first-year performance. The following shows Stay Swift Corp.'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. Stay Swift Corp. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net 6,350 5,000 Sales 1,610 1,495 318 200 Operating costs except depreciation and amortization Depreciation and amortization Total Operating costs Operating Income (or EBIT) 1,695 1,928 4,422 3,305 442 430 2,875 Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 3,980 1,592 2,388 1,150 1,725 Calculate the profitability ratios of Stay Swift Corp. in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Value Year 2 Year 1 Operating margin 66.10% Profit margin 37.61% Return on total assets 14.68% Return on common equity 27.60% Basic earning power 23.53% 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. O A higher operating margin than the industry average indicates either lower operating costs, higher product pricing, or both. 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 a company's earnings means that the profit margin is increasing. If a company issues new common shares but its net income does not increase, return on common equity will increase