Exercise 13-11 Analyzing profitability LO P3

Simon Companys year-end balance sheets follow.

At December 31	Current Yr			1 Yr Ago			2 Yrs Ago
Assets
Cash	$	31,600		$	34,400		$	37,600
Accounts receivable, net		89,700			63,600			52,400
Merchandise inventory		66,098			82,500			55,900
Prepaid expenses		10,136			10,707			4,138
Plant assets, net		352,466			303,793			229,962
Total assets	$	550,000		$	495,000		$	380,000
Liabilities and Equity
Accounts payable	$	135,580		$	83,655		$	50,160
Long-term notes payable secured by mortgages on plant assets		103,400			116,127			81,461
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		148,520			132,718			85,879
Total liabilities and equity	$	550,000		$	495,000		$	380,000

The companys income statements for the Current Year and 1 Year Ago, follow.

For Year Ended December 31	Current Yr						1 Yr Ago
Sales				$	715,000					$	589,050
Cost of goods sold	$	436,150					$	382,883
Other operating expenses		221,650						149,030
Interest expense		12,155						13,548
Income tax expense		9,295						8,836
Total costs and expenses					679,250						554,297
Net income				$	35,750					$	34,753
Earnings per share				$	2.20					$	2.14

Additional information about the company follows.

Common stock market price, December 31, Current Year	$	28.00
Common stock market price, December 31, 1 Year Ago		26.00
Annual cash dividends per share in Current Year		0.38
Annual cash dividends per share 1 Year Ago		0.19

For both the Current Year and 1 Year Ago, compute the following ratios: 1. Return on common stockholders' equity. 2. Price-earnings ratio on December 31. 2a. Assuming Simon's competitor has a price-earnings ratio of 7, which company has higher market expectations for future growth? 3. Dividend yield.