Year 2 Year 1 Net Sales Operating costs except depreciation and amortization Depreciation and amortization Total Operating costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 6,350 1,365 318 1,683 4,667 5,000 1,268 200 1,468 3,532 371 630 4,037 1,615 3,161 1,264 1,897 2,422 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 70.64% 38.14% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 16.15% 30.35% 24.83% 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. An increase in the return on assets ratio implies an increase in the assets a firm owns. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. If a company issues new common shares but its net income does not increase, return on common equity will increase Year 2 Year 1 Net Sales Operating costs except depreciation and amortization Depreciation and amortization Total Operating costs Operating Income (or EBIT) Less: Interest Earnings before taxes (EBT) Less: Taxes (40%) Net Income 6,350 1,365 318 1,683 4,667 5,000 1,268 200 1,468 3,532 371 630 4,037 1,615 3,161 1,264 1,897 2,422 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 70.64% 38.14% Operating margin Profit margin Return on total assets Return on common equity Basic earning power 16.15% 30.35% 24.83% 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. An increase in the return on assets ratio implies an increase in the assets a firm owns. If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes. If a company issues new common shares but its net income does not increase, return on common equity will increase
