Year 1 100 Petroxy Oil Co. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Net Sales 3,175 2,500 Operating costs except depreciation and amortization 1,855 1,723 Depreciation and amortization 159 Total Operating costs 2,014 1,823 Operating Income (or EBIT) 1,161 677 Less: Interest 116 54 Earnings before taxes (EBT) 1,045 623 Less: Taxes (40%) 418 249 Net Income 627 374 Calculate the profitability ratios of Petroxy Oil Co. in the following table. Convert all calculations to a percentage rounded to two decimal places. Ratio Value Year 2 Year 1 27.08% 19.75% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 6.37% 11.97% 12.35% 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. 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 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