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 fim. 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 $11,750 million in the first ye 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. Net Sales 318 Spandust Industries Inc. Income Statement for the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 6,350 5,000 Operating costs except depreciation and amortization 1,855 1,723 Depreciation and amortization 200 Total Operating costs 2,173 1,923 Operating Income (or EBIT) 4,177 3,077 Less: Interest Earnings before taxes (EBT) 3,613 2,754 Less: Taxes (40%) 1,445 1,102 2,168 1,652 564 323 Net Income 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 61.54% 34.14% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 14.06% 26.43% 22.22% Decision makers and analysts look deeply into profitability ratios to identify trends in a company's prontability. Profitability ratlos give insights into both the survivability of a company and the benefits that shareholders receive. Identity which of the following statements are true about profitability ratios. Check all that apply. A higher operating margin than the industry average indicates either tower 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