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 $ 35,000 $ 36,400 88,600 64,400 59,400 78,904 84,500 56,400 10,861 9,878 3,889 345, 135 286, 222 193,911 $ 555,000 $480,000 $350,000 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 $ 138, 195 $ 79,498 $ 45,738 101,210 108,192 77,350 162,500 162,500 162,500 153,095 129,810 64,412 $ 555,000 $480,000 $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 Current Yr $721,500 $440,115 223,665 12,266 9,380 685,426 $ 36,074 1 Yr Ago $ 571,200 $371,280 144,514 13,138 8,568 537,500 $ 33,700 Earnings per share $ 2.22 $ 2.07 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 0.26 0.13 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 8, 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: Required 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: Il Price-Earnings Ratio Price-earnings ratio 1 II Current Year: 1 II 1 Year Ago: / = 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 Dividend yield % Current Year: / II 1 Year Ago 1 = %
