Here are comparative statement data for Blue Company and Gray Company, two competitors. All balance sheet data are as of December 31, 2010, and December 31, 2009.
|
Blue Company |
Gray Company |
|||
|
2010 |
2009 |
2010 |
2009 |
|
|
Net sales |
$1,849,035 |
$546,000 |
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|
Cost of goods sold |
1,080,490 |
278,000 |
||
|
Operating expenses |
250,000 |
82,000 |
||
|
Interest expense |
6,800 |
1,600 |
||
|
Income tax expense |
62,030 |
31,000 |
||
|
Current assets |
325,975 |
$312,410 |
83,336 |
$ 79,467 |
|
Plant assets (net) |
526,800 |
500,000 |
139,728 |
125,812 |
|
Current liabilities |
66,325 |
75,815 |
35,348 |
30,281 |
|
Long term liabilities |
113,990 |
90,000 |
29,620 |
25,000 |
|
Common stock, $10 par |
500,000 |
500,000 |
120,000 |
120,000 |
|
Retained earnings |
172,460 |
146,595 |
38,096 |
29,998 |
(a) Prepare a vertical analysis of the 2010 income statement data for Blue Company and Gray Company.
(b) Comment on the relative profitability of the companies by computing the 2010 return on assets and the return on common stockholders’ equity ratios for both companies.