AP12-1A

(Common-size analysis and differences in profitability)

Comparative financial statement data for First Ltd. and Supreme Ltd., two competitors, follow:

	First Ltd		Supreme Ltd
	2020	2019	2020	2019
Net Sales	$337,500		$1,950,000
Cost of goods sold	202,500		1,950,000
Operating expense	68,250		468,000
Interest expense	3,375		37,800
Income tax expense	17,400		70,500
Current assets	165,000	$142,500	1,020,000	$780,000
Capital assets(net)	420,000	367,500	1,530,000	1,1,425,000
Current Liabilities	52,500	42,750	225,000	2,400,000
Long-term liabilities	67,500	95,250	630,000	540,000
Share capital	345,000	270,000	1,200,000	1,125,000
Retained earning	120,000	102,000	495,000	300,000

Required

a. Prepare a common-size analysis of the 2020 statement of income data for First Ltd. and Supreme Ltd.

b. Calculate the return on assets and the return on shareholders' equity for both companies.