Exercise 13-11 Analyzing profitability LO P3 Simon Company's year-end balance sheets follow. Current Yr 1 Yr Ago 2 Yrs Ago At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 31,800 $ 34,600 $ 36,300 88,800 63,000 54,900 65,561 84,400 51,800 11, 210 10,499 4,111 392,629 302,501 222,889 $590,000 $495,000 $370,000 $149,848 $ 82,818 $ 47,863 108,702 112,711 80,952 162,500 162,500 162,500 168,950 136,971 78,685 $590,000 $495,000 $370,000 The company's income statements for the Current Year and 1 Year Ago, follow. For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income tax expense Total costs and expenses Net income Current Yr $767,000 $467,870 237,770 13,039 9,971 728,650 $ 38, 350 1 Yr Ago $589,050 $382,883 149,030 13,548 8,836 554, 297 $ 34,753 Earnings per share $ 2.36 $ 2.14 Additional information about the company follows. Common stock market price, December 31, Current Year Common stock market price, December 31, 1 Year Ago Annual cash dividends per share in Current Year Annual cash dividends per share 1 Year Ago $33.00 31.00 0.32 0.16 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 2a Required 3 Compute the return on common stockholders' equity for each year. Return On Common Stockholders' Equity Choose Numerator: 1 Choose Denominator: Return On Common Stockholders' Equity Return on common stockholders' equity = % Current Year: 1 Year Ago: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 2a Required 3 Assuming Simon's competitor has a price-earnings ratio of 7, which company has higher market expectations for future growth? Which company has higher market expectations for future growth? Required 1 Required 2 Required 2a Required 3 Compute the dividend yield for each year. (Round your answers to 2 decimal places.) Dividend Yield Choose Numerator: 1 Choose Denominator: = Dividend Yield 1 II Dividend yield % Current Year: = 1 Year Ago Il % Required 2a Required 3
