Comparative financial statement data for First Company and Foremost Company, two competitors, follow:

Required:
a. Prepare a common size analysis of the 2010 statement of earnings data for First Company and Foremost Company.
b. Calculate the return on assets and the return on shareholders' equity for both companies. For the ROA, break it down into its two component ratios.
c. Comment on the relative profitability of these companies.
d. Identify two main reasons for the difference in their profitability.

Transcribed Image Text:

First Company Foremost Company 2010 2009 2010 2009 Net sales Cost of goods sold Operating expenses Interest expense Income tax expense Current assets Capital assets (net) Current liabilities Long-term liabilities Share capital Retained earnings $337,500 202,500 68,250 $1,950,000 1,092,000 468,000 37,800 70,500 65,000 $142,500 1,020,000 3,375 17,400 780,000 420,000 367,500 ,530,000 425,000 2,750225,000 2,400,000 540,000 52,500 67,500 45,000 270,000 200,000 125,00 20,000 02,000495,000300,000 95.250 630,000