Simon Company's year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 28,479	$ 33,625	$ 34,326
Accounts receivable, net	83,373	58,844	45,768
Merchandise inventory	105,875	80,091	49,737
Prepaid expenses	9,449	8,827	4,009
Plant assets, net	260,388	238,927	219,960
Total assets	$ 487,564	$ 420,314	$ 353,800
Liabilities and Equity
Accounts payable	$ 123,832	$ 69,612	$ 46,702
Long-term notes payable	88,912	98,606	78,972
Common stock, $10 par value	163,500	162,500	163,500
Retained earnings	111,320	89,596	64,626
Total liabilities and equity	$ 487,564	$ 420,314	$ 353,800

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

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

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 633,833		$ 500,174
Cost of goods sold	$ 386,638		$ 325,113
Other operating expenses	196,488		126,544
Interest expense	10,775		11,504
Income tax expense	8,240		7,503
Total costs and expenses		602,141		470,664
Net income		$ 31,692		$ 29,510
Earnings per share		$ 1.95		$ 1.82

Additional information about the company follows.

Common stock market price, December 31, Current Year	$ 30.00
Common stock market price, December 31, 1 Year Ago	28.00
Annual cash dividends per share in Current Year	0.24
Annual cash dividends per share 1 Year Ago	0.12

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 6, 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 3A
• Required 3B

Compute the return on equity for each year.

Return On Equity
	Numerator:			/	Denominator:	=	Return On Equity
	Net income		Preferred dividends	/		=	Return on equity
Current Year:	$33,723		279,389	/		=	0	%
1 Year Ago:				/		=	0	%