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 $ 31,300 $ 34,500 $ 36,800 88,400 64,100 51,000 48,341 83,400 54,600 10,800 10,389 4,151 401,159 292,611 223,449 $580,000 $485,000 $370,000 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 $145,864 $ 83,604 $ 50, 305 111,221 111,550 80,952 162,500 162,500 162,500 160,415 127,346 76,243 $580,000 $485,000 $370,000 The company's income statements for the Current Year and 1 Year Ago, follow. 1 Yr Ago $577,150 $375,148 For Year Ended December Current Yr 31 Sales $754,000 Cost of goods sold $459,940 Other operating 233,740 expenses Interest expense 12,818 Income tax expense 9,802 Total costs and 716,300 expenses Net income $ 37,700 $ 2.32 Earnings per share 146,019 13,274 8,657 543,098 $ 34,052 $ 2.10 Additional information about the company follows. es Common stock market price, December 31, $28.00 Current Year Common stock market price, December 31, 1 26.00 Year Ago Annual cash dividends per share in Current 0.40 Year Annual cash dividends per share 1 Year Ago 0.20 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 s Choose Numerator: Choose Denominator: Return On Common Stockholders' Equity Return on common stockholders' equity % / 11 11 Current Year: % 1 Year Ago: Required Required 2 > 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: 11 Choose Numerator: Price-Earnings Ratio Price-earnings ratio F TL Current Year: IL 1 Year Ago: 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 = Choose Numerator: | Choose Denominator: MU Dividend Yield Dividend yield % Current Year: = % 1 Year Ago