The following income statements were drawn from the annual reports of the Denver Company and the Reno Company:

Required
a. One of the companies is a high-end retailer that operates in exclusive shopping malls. The other operates discount stores that are located in low-cost, stand-alone buildings. Identify the high-end retailer and the discounter. Support your answer with appropriate ratios.
b. If Denver and Reno have equity of $130,000 and $160,000, respectively, which company is in the more profitable business?

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Denver* Reno* Net sales Cost of goods sold Gross margin Less: Operating exp. $190,000 180,000 (114,000) (126,000) 54,000 76,000 Selling and admin. exp. Net income (62,700)(39,600) S13.300 S14.400