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relative profitability

Comparative statement data for Douglas Company and Maulder Company, two competitors, appear below. All balance sheet data are as of December 31, 2009, and December 31, 2008.

Douglas Company Maulder Company
2009 2008 2009 2008
Net sales $1,549,035 $339,038
Cost of goods sold 1,080,490 241,000
Operating expenses 302,275 79,000
Interest expense 8,980 2,252
Income tax expense 54,500 6,650
Current assets 325,975 $312,410 83,336 $ 79,467
Plant assets (net) 521,310 500,000 139,728 125,812
Current liabilities 65,325 75,815 35,348 30,281
Long-term liabilities 108,500 90,000 29,620 25,000
Common stock, $10 par 500,000 500,000 120,000 120,000
Retained earnings 173,460 146,595 38,096 29,998

Hint:
Prepare vertical analysis and comment on profitability.

Instructions

(a) Prepare a vertical analysis of the 2009 income statement data for Douglas Company and Maulder 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 ratios for both companies.

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Solution Summary

The relative profitability is assessed.

$2.19