I need help with the Return on Common Equity for Year 2? I was able to fill in the rest of the table, but I was unsure about the 'Common Equity' for year 2 in the formula Net Income/Common Equity.

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 Petroxy Oil Co. and make comments on its second-year performance as compared with its first-year performance.

The following shows Petroxy Oil Co.s income statement for the last two years. The company had assets of $3,525 million in the first year and $5,639 million in the second year. Common equity was equal to $1,875 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.

Petroxy Oil Co. Income Statement For the Year Ending on December 31 (Millions of dollars)

	Year 2	Year 1
Net Sales	1,905	1,500
Operating costs except depreciation and amortization	1,365	1,268
Depreciation and amortization	95	60
Total Operating Costs	1,460	1,328
Operating Income (or EBIT)	445	172
Less: Interest	60	22
Earnings before taxes (EBT)	385	150
Less: Taxes (25%)	96	38
Net Income	289	112

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
Operating margin	23.36%	11.47%
Profit margin	15.17%	7.47%
Return on total assets	5.13%	3.18%
Return on common equity		5.97%
Basic earning power	7.89%	4.88%