Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data are as of December 31, 2017, and December 31, 2016.

Instructions

(a) Prepare a vertical analysis of the 2017 income statement data for Farris Company and Ratzlaff Company in columnar form.

(b) Comment on the relative profitability of the companies by computing the return on assets and the return on common stockholders’ equity for both companies.

Farris Company Ratzlaff Company 2017 2016 2017 2016 $1,549,035 1,080,490 302,275 8,980 54,500 325,975 521,310 65,325 108,500 500,000 173,460 Net sales $339,038 Cost of goods sold Operating expenses Interest expense Income tax expense 241,000 79,000 2,252 6,650 83,336 139,728 35,348 29,620 $ 79,467 $312,410 500,000 75,815 Current assets Plant assets (net) 125,812 30,281 25,000 120,000 29,998 Current liabilities Long-term liabilities Common stock, $10 par Retained earnings 90,000 500,000 146,595 120,000 38,096