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 $ 34,400 $ 37,000 89,000 63,000 59,900 46,192 83,200 52,500 11,004 10,084 3,485 407,004 299, 316 167, 115 $585,000 $490,000 $ 320,000 $145,665 $ 81,982 $ 41,818 108,880 114,954 70, 720 162,500 162,500 162,500 167,955 130,564 44,962 $585,000 $490,000 $ 320,000 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 $760,500 $463,905 235,755 12,929 9,887 722,476 $ 38,024 1 Yr Ago $ 583,100 $379,015 147,524 13,411 8,747 548,697 $ 34,403 $ 2.34 $ 2.12 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 $ 29.00 27.00 0.30 0.15 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 6, which company has higher market expectations for future 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: I Choose Denominator: Return On Common Stockholders' Equity Return on common stockholders' equity 11 = / = % Current Year: 1 Year Ago: = % plete this question by entering your answers in ne 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.) Choose Numerator: Price-Earnings Ratio 1 Choose Denominator: 1 Price-Earnings Ratio Price-earnings ratio = = Current Year: 1 Year Ago: 1 1 = 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 6, which company has higher market expectations for future growth? Which company has higher market expectations for future growth? 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: 1 Choose Denominator: 1 Current Year: 1 1 Year Ago II Dividend Yield Dividend yield % II II %
