Here are comparative statement data for Night Company and DayCompany, two competitors. All balance sheet data are as of December 31, 2007,and December 31, 2006.
NightCompany Day Company
2007 2006 2007 2006
Net sales $350,000 $1,200,000
Cost of goods sold 180,000 624,000
Operating expenses 51,000 278,000
Interest expense 3,000 10,000
Income tax expense 17,000 54,000
Current assets 130,000 $100,000 700,000 $650,000
Plant assets (net) 400,000 270,000 1,000,000 750,000
Current liabilities 60,000 52,000 250,000 275,000
Long-term liabilities 50,000 68,000 200,000 150,000
Common stock 360,000 210,000 950,000 700,000
Retained earnings 60,000 40,000 300,000 275,000
Instructions
(a) Prepare a vertical analysis of the 2007 income statementdata for Night Company and Day Company.
(b) Comment on the relative p rofitability of the companies bycomputing the return on assets and the return on commonstockholders' equity ratios for both companies.