Common-size analysis and difference to profitability

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

First Ltd. Supreme Ltd

	2020	2019	2020	2019
Net sales	$337,500		$1,950,000
Cost of goods sold	202,500		1,092,000
Operating expenses	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	1,425,000
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 earnings	120,000	102,000	495,000	300,000

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

c) Comment on the relative profitability of these companies

d) Based on your calculations, identify two main reasons for the difference in their profitability