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 earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year.

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 depreciation and amortization	1,610	1,495
Depreciation and amortization	254	160
Total Operating Costs	1,864	1,655
Operating Income (or EBIT)	3,216	2,345
Less: Interest	434	246
Earnings before taxes (EBT)	2,782	2,099
Less: Taxes (25%)	696	525
Net Income	2,086	1,574

Calculate the profitability ratios of Spandust Industries Inc. in the following table. Convert all calculations to a percentage rounded to two decimal places.

Ratio	Value
	Year 2	Year 1
Operating margin		58.63%
Profit margin	41.06%
Return on total assets		16.74%
Return on common equity		31.48%
Basic earning power	21.39%