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Profitability ratios

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 Stay Swilt Corp. and make comments on its second$-$year performance as compared with

its first$-$year performance.

The following shows Stay Swift Corp.$\text{'}$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 compamy distributed $100\%$ of its eamings out

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

Stay Swift Corp. Income Statement For the Year Ending on December $31($Millions of dollars$)$

Calculate the profitability ratios of Stay Swift Corp. in the following table Convert all calculations to a percentage rounded to two decimal places.

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 cperating 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 retum 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, retum on common equity will increase.

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