Comment on the relative profitability of the companies by computing the return on assets

| September 29, 2018

Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data are as of December 31, 2015, and December 31, 2014.Farris CompanyRatzlaff Company2015201420152014Net sales$1,549,035$339,038Cost of goods sold1,080,490241,000Operating expenses302,27579,000Interest expense8,9802,252Income tax expense54,5006,650Current assets325,975$312,41083,336$ 79,467Plant assets (net)521,310500,000139,728125,812Current liabilities65,32575,81535,34830,281Long-term liabilities108,50090,00029,62025,000Common stock, $10 par500,000500,000120,000120,000Retained earnings173,460146,59538,09629,998Instructions(a)Prepare a vertical analysis of the 2015 income statement data for Farris Company and Ratzlaff Company in columnar form.(b)Comment on the relative profitability of the companies by computing the return on assets and the return on common stockholders’ equity for both companies.

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