The following shows Dernham Inc.'s income statement for the last two years. The company had assets of $4,700 million in the first year and $7,518 million in the second year. Common equity was equal to $2,500 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. Dernham Inc. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 Net Sales 2,540 2,000 Operating costs except depreciation and amortization 1,610 1,495 Depreciation and amortization 127 80 Total Operating costs 1,737 1,575 Operating Income (or EBIT) 803 425 Less: Interest 108 45 Earnings before taxes (EBT) 695380 Less: Taxes (40%) 278 152 Net Income 417 228 Calculate the profitability ratios of Dernham Inc. in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Value Year 2 Year 1 21.25% 16.42% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 4.85% 9.12% 10.68% 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 profit margin of 10%, it means that the company 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. 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