Here are comparative statement data for Spencer Ltd and Forrester Ltd, two competitors. All data relating to the statement of financial position are as at 30 June, the end of the reporting period for both entities. 

Required

(a) Prepare a vertical analysis of the 2016 statement of profit or loss data for both entities.

(b) Comment on the relative profitability of the entities by calculating the return on assets and the return on ordinary shareholders’ equity for both entities.

Net sales Cost of sales Operating expenses Finance costs Income tax expense Profit Current assets Non-current assets Current liabilities Non-current liabilities Share capital, $10 each Retained earnings Spencer Ltd 2016 $1 250 000 690 000 321 000 6000 69 900 163 100 325 975 521 310 79595 108 500 500 000 159 190 2015 $312410 500 000 75815 90 000 500 000 146 595 Forrester Ltd 2015 2016 $410000 257 000 62 000 1200 26940 62 860 188 000 240 000 36000 27 000 320 000 45 000 $180 000 216 000 32 000 24 000 300 000 40 000