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 $ 31,600 $ 34,600 $ 36,600 88,300 62,700 58,700 81, 116 82,200 56,300 10,321 9,425 3,734 348,663 251, 075 194,666 $560,000 $440,000 $ 350,000 $ 142, 229 $ 74,360 $ 47,586 105,280 101,200 75,803 162,500 162,500 162,500 149,991 101,940 64,111 $560,000 $440,000 $ 350,000 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 Earnings per share Current Yr $ 728,000 $444,080 225,680 12,376 9,464 691,600 $ 36,400 $ 2.24 1 Yr Ago $ 523,600 $340, 340 132,471 12,043 7,854 492,708 $ 30,892 ta 1.90 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 0.38 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. 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: / % Required 1 Required 2 > 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: | Choose Denominator: Price-Earnings Ratio Price-earnings ratio / = Current Year: 7 1 Year Ago: 1 Il Required 1 Required 2 Required 20 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 2 Required 3 > Required 1 Required 2 Required 2a Required Compute the dividend yield for each year. (Round your answers to 2 decimal places.) Dividend Yield | Choose Denominator: Choose Numerator: = Dividend Yield Dividend yield % Current Year: / 1 Year Ago / %
