5.

Suppose an analyst has gathered the following information about two companies:

	Company A	Company B
Revenues	10,000	3,000
Gross profit	4,000	1,500
Operating profit	2,000	700
Net income	1,300	500
Total assets	8,000	2,400
Total debt	3,000	400

a. Using common-size analysis, which company is more profitable? Explain and support your answer.

b. Which company has a higher ROE? Which company do you prefer as an investment opportunity? Explain and support your answer.