Question

Here are comparative statement data for Duke Company and Lord Company, two competitors. All balance sheet data are as of December 31, 2022, and December 31, 2021 Duke Company Lord Company 2021 2022 2021 2022 $1,849,000 $546,000 Net sales Cost of goods sold 1,063,200 289,000 Operating expenses 240,000 82,000 Interest expense 6,800 3,600 Income tax expense 62,000 28,000 325,980 $312.410 Current assets 83,336 $79,467 Plant assets (net) 526,800 500,000 139,729 125,812 Current liabilities 66,325 75,815 35,348 30,281 25,000 Long-term liabilities 113,990 29,620 90,000 Common stock, $10 par 500,000 500,000 120,000 120,000 Retained earnings 172,460 146,600 38,096 29,998

Answer 1

Answer:

Particulars	Duke CO.		Lord Co.
	$	%	$	%
Net sales	$1,849,000	100.00%	$546,000	100.00%
Less: COGS	$1,063,200	57.50%	$289,000	52.93%
Gross profit	$785,800	42.50%	$257,000	47.07%
Operating expenses	$240,000	12.98%	$82,000	15.02%
Income from operations	$545,800	29.52%	$175,000	32.05%
Other expenses & losses:		0.00%		0.00%
Interest expense	$6,800	0.37%	$3,600	0.66%
Income before income taxes	$539,000	29.15%	$171,400	31.39%
Income taxes	$62,000	3.35%	$28,000	5.13%
Net income/(Loss)	$477,000	25.80%	$143,400	26.26%

Note:

Net sales is base for calculating percentage in vertical analysis so it is taken as 100%. For calculating percentage of each item following formula will be used;

(Individual item x 100 / Net sales)

Return on Asset
	Duke Co.	Lord Co.
Net Income	$477,000	$143,400
Average Asset	$832,595	$214,172
	(325980+312410+526800+500000)/2	(83336+79467+139729+125812)/2
Net Income / Average Asset	57.29%	66.96%

Return on Common Shareholder Equity
	Duke Co.	Lord Co.
Net Income	$477,000	$143,400
Average Common Share	$500,000	$154,047
Net Income / Common Share	95.4%	93.09%