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 $ 31,200 $ 34,900 $ 37,700 89, 200 63,600 51,600 47,177 82,400 58,300 10,910 10,393 4,180 401,513 298,707 228, 220 $580,000 $490,000 $380,000 $147,308 $ 81,982 $ 49,658 110,130 116,081 82,300 162,500 162,500 162,500 160,062 129,437 85,542 $580,000 $490,000 $380,000 The company's income statements for the Current Year and 1 Year Ago, follow. Current Yr $ 754,000 $ 459,940 233,740 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 12,818 9,802 1 Yr Ago $ 583,100 $379,015 147,524 13,411 8, 747 548,697 $ 34,403 $ 2.12 716,300 $ 37,700 $ 2.32 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 $32.00 30.00 0.28 0.14 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: = Net income Return On Common Stockholders' Equity Return on common stockholders' equity 0 % Preferred dividends Average common stockholders' equity / II Current Year: $ 37,700 1 = 1 Year Ago: 1 0 % 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 Denominator: Choose Numerator: Price-Earnings Ratio Price-earnings ratio / Current Year: / = 0 1 Year Ago: II 0 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? 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 1 Choose Denominator: Choose Numerator: Dividend Yield 1 = Dividend yield Current Year: 1 0 % 1 Year Ago 1 = 0 %