Exercise 17-11 Analyzing profitability LO P3 Simon Companys year-end balance sheets follow.
Exercise 17-11 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 $ 34,700 $ 36,600 88,600 62,000 56,900 88,411 84,200 55,200 10, 746 9,746 3,485 340, 743 264,354 167,815 $ 560,000 $455,000 $320,000 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 $ 135,257 $ 76,895 $ 42,662 108,438 104,650 71,427 162,500 162,500 162,500 153,805 110,955 43,411 $ 560,000 $455,000 $320,000 The company's income statements for the Current Year and 1 Year Ago, follow. 1 Yr Ago $ 541,450 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 $728,000 $444,080 225, 680 12,376 9,464 691,600 $ 36, 400 $351,943 136,987 12,453 8,122 509,505 $ 31,945 Earnings per share $ 2.24 S 1.97 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 $33.00 31.00 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. 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 0 % Net income - Preferred dividends Average common stockholders' equity 1 Current Year: 1 Year Ago: $ $ 36,400 31,945 0 / 0 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.) Choose Numerator: Price-Earnings Ratio 1 Choose Denominator: 1 Price-Earnings Ratio = Price-earnings ratio / 11 0 Current Year: 1 Year Ago: 1 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?
