Exercise 13-11 Analyzing profitability LO P3 Simon Company's year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago $ 31,500 $ 34,500 $ 36,200 88,400 63,800 57,400 35,554 82,600 58,500 10,171 9,030 3, 444 364,375 240,070 154,456 $530,000 $430,000 $310,000 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 $129,331 $ 70,490 $ 41,738 97,647 101,867 66,455 162,500 162,500 162,500 140,522 95, 143 39, 307 $530,000 $430,000 $310,000 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 Current Yr $689,000 $ 420,290 213,590 11,713 8, 957 654,550 $ 34,450 1 Yr Ago $ 511,700 $332,605 129,460 11,769 7,676 481,510 $ 30,190 Net income Earnings per share $ 2.12 $ 1.86 Additional information about the company follows. 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 $ 30.00 28.00 0.24 0.12 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 Compute the price-earnings ratio for each year. (Round your answers to 2 decimal places.) Price-Earnings Ratio Choose Numerator: 1 Choose Denominator: II Price-Earnings Ratio Price-earnings ratio / II Current Year: / II 1 Year Ago: 1 Il Complete this question by entering your answers in the tabs below. 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: | Choose Denominator: Dividend Yield Dividend yield Current Year: 1 = 1 Year Ago 1 %