Question

Application Problem 12-1A a-b (Common-size analysis and differences in profitability) Comparative financial statement data for First Ltd. and Supreme Ltd., two competitors, follow: Net sales Cost of goods sold Operating expenses Interest expense Income tax expense Current assets Capital assets (net) Current liabilities Long-term liabilities Share capital Retained earnings First Ltd. 2020 2019 $333,400 203,374 62,990 3,440 17,330 175,950 $153,650 420,700 332,180 48,820 40,560 72,040 101,660 313,000 249,000 162,790 94,610 Supreme Ltd. 2020 2019 $2,121,600 1,230,528 473,250 34,100 65,940 1,069,600 $856,490 1,615,400 1,564,820 229,880 244,770 658,970 569,480 1,104,000 1,189,000 692,150 418,060 Prepare a common-size analysis of the 2020 statement of income data for First Ltd. and Supreme Ltd. (Round percentage answers to 1 decimal place, e.g. 15.1%.) First Supreme LINK TO TEXT LINK TO TEXT Calculate the return on assets and the return on shareholders' equity for both companies. (Round answers to 1 decimal place, e.g. 15.1%.) First Supreme Return on assets Return on shareholders' equity LINK TO TEXT LINK TO TEXT

Answer 1

First Ltd. And Supeme Ltd. Statement od Common Size Income Statement For period ending 2020 First Ltd. Supreme Ltd. Amount Amount Net Sales 100.00% 2121600 100.00% 333400 Cost of goods sold 203374 61.00% 58.00% 1230528 130026 39.00% 42.00% Gross Profit 891072 18.89% 22.31% Operating Expense 62990 473250 Interest Expense 1.03% 34100 1.61% 3440 17330 5.20% 3.11% Income Expense 65940 13.88% 14.98% Net Income 46266 317782 Return on Assets Net Income Avg.Total Assets First Ltd. 46266/(175950420700+153650 332180) /2 =46266 541240 = 8.55% Supreme Ltd. 317782/ (1069600 1615400 856490 1564820)/2 = 317782 /2553155 =12.45% Return on Shareholders Equity = Net Income/Avg. Common Stockholders Equity First Ltd. 46266/(313000 +162790 249000+94610)/2 46266/409700 11.29% Supreme Ltd. = 317782/ (1104000+692150 1189000 +418060)/2 = 317782 /1701605 -18.68%

А В C D E First Ltd. And Supeme Ltd. 1 2. 3 Statement od Common Size Income State 4 For period ending 2020 First Ltd. Supreme Ltd. 5 б Amount Amount 7 Net Sales 333400 1 2121600 1 -в8/$B$7 D8/$D$7 8 Cost of goods sold 1230528 203374 89/$B$7 =B10/$B$7 =D9/$D$7 9 Gross Profit =B7-B8 D7-D8 =D10/$D$7 10 Operating Expense 473250 62990 B11/$B$7 D11/$D$7 11 Interest Expense 34100 3440 -D12/$D$7 B12/$B$7 12 Income Tax Expense 17330 65940 =B13/$B$7 =D13/$D$7 13 Net Income -B9-B10-B11-B12 -D9-D10- D11-D12 14 ш