At the end of 2012 the following information is available for Davis and Long companies.

Required

a. Prepare a common size income statement for each company.

b. Compute the return on assets and return on equity for each company.

c. Which company is more profitable from the stockholders' perspective?

d. One company is a high-end retailer, and the other operates a discount store. Which is the discounter? Support your selection by referring to the appropriate ratios.

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Davis Long Sales $1,500,000 $1,500,000 Cost of goods sold 1,050,000 1,125,000 Operating expenses 350,000 250,000 Total assets 1,800,000 1,800,000 Stockholders' equity 720,000 720,000