Exercise 17-11 (Algo) Analyzing profitability LO P3

The companys income statements for the Current Year and 1 Year Ago, follow.

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 544,870		$ 429,971
Cost of goods sold	$ 332,371		$ 279,481
Other operating expenses	168,910		108,783
Interest expense	9,263		9,889
Income tax expense	7,083		6,450
Total costs and expenses		517,627		404,603
Net income		$ 27,243		$ 25,368
Earnings per share		$ 1.68		$ 1.56

Additional information about the company follows.

Common stock market price, December 31, Current Year	$ 33.00
Common stock market price, December 31, 1 Year Ago	31.00
Annual cash dividends per share in Current Year	0.36
Annual cash dividends per share 1 Year Ago	0.18

For both the current year and one year ago, compute the following ratios: 1. Return on equity. 2. Dividend yield. 3a. Price-earnings ratio on December 31. 3b. Assuming Simon's competitor has a price-earnings ratio of 7, which company has higher market expectations for future growth?

Use the following information for the Exercises below. (Algo) Simon Company's year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 24,481	$ 29,484	$ 30,405
Accounts receivable, net	71,671	51,091	38,950
Merchandise inventory	91,014	66,176	42,756
Prepaid expenses	8,202	7,360	3,312
Plant assets, net	223,763	207,209	185,677
Total assets	$ 419,131	$ 361,320	$ 301,100
Liabilities and Equity
Accounts payable	$ 102,276	$ 59,231	$ 40,143
Long-term notes payable	78,009	83,104	65,212
Common stock, $10 par value	163,500	163,500	162,500
Retained earnings	75,346	55,485	33,245
Total liabilities and equity	$ 419,131	$ 361,320	$ 301,100

For both the current year and one year ago, compute the following ratios: