Question

Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...

Simon Company’s year-end balance sheets follow.

At December 31 Current Yr 1 Yr Ago 2 Yrs Ago
Assets
Cash 31,900 34,500 37,200
Accounts receivable, net 89,600 64,500 56,500
Merchandise inventory 90,869 84,600 50,700
Prepaid expenses 10,075 9,532 3,520
Plant assets, net

302,556

251,868 172,080
Total assets 525,000 445,000 320,000
Liabilities and Equity
Accounts payable 134,647 75,205 41,395
Long-term notes payable secured by
mortgages on plant assets
96,726 103,374 70,013
Common stock, $10 par value 162,500 162,500 162,500
Retained earnings 131,127 103,921 46,092
Total liabilities and equity 525,000 445,000 320,000


The company’s income statements for the Current Year and 1 Year Ago, follow.

For Year Ended December 31 Current Yr 1 Yr Ago
Sales 682,500 529,550
Cost of goods sold 416,325 344,208
Other operating expenses 211,575 133,976
Interest expense 11,603 12,180
Income tax expense 8,873 7,943
Total costs and expenses 648,376 498,307
Net income 34,124 31,243
Earnings per share 2.10 1.92


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 0.26
Annual cash dividends per share 1 Year Ago 0.13


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 6, which company has higher market expectations for future growth?
3. Dividend yield.

**There is no incomplete sentences

Homework Answers

Answer #1

1.

Return on common stockholders' equity = Net income - Preferred dividend / Average common stockholders

Current year = $34,124 - 0 / $162,500 = 21%

1 year ago = $31,243 - 0 / $162,500 = 19.23%

2.

Price earning ratio = Market price per share / Earning per share

Current year = $30 / $2.10 = 14.29

1 year ago = $28 / $1.92 = 14.58

2a.

Simon company has higher market expectation for future growth.

3.

Dividend yield = Annual cash dividend per share / Market price per share

Current year = $0.26 / $30 = 0.87%

1 year ago = $0.13 / $28 = 0.46%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 31,100 $ 34,700 $ 37,800 Accounts receivable, net 89,300 64,900 57,600 Merchandise inventory 79,076 82,400 56,000 Prepaid expenses 10,274 9,438 4,264 Plant assets, net 315,250 253,562 224,336 Total assets $ 525,000 $ 445,000 $ 380,000 Liabilities and Equity Accounts payable $ 132,032 $ 72,949 $ 49,658 Long-term notes payable secured by mortgages on plant assets 97,713 105,421 82,300 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 28,260 $ 34,025 $ 33,385 Accounts receivable, net 82,726 58,387 46,330 Merchandise inventory 101,952 77,918 48,862 Prepaid expenses 9,010 8,845 3,709 Plant assets, net 257,039 233,745 211,814 Total assets $ 478,987 $ 412,920 $ 344,100 Liabilities and Equity Accounts payable $ 121,653 $ 68,388 $ 45,421 Long-term notes payable secured by mortgages on plant assets 89,149 96,871 73,765 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 35,940 $ 42,011 $ 43,761 Accounts receivable, net 89,000 62,600 51,100 Merchandise inventory 110,000 83,500 57,000 Prepaid expenses 11,574 11,028 4,862 Plant assets, net 368,799 331,303 289,777 Total assets $ 615,313 $ 530,442 $ 446,500 Liabilities and Equity Accounts payable $ 151,681 $ 88,748 $ 58,349 Long-term notes payable secured by mortgages on plant assets 114,522 120,782 97,690 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 30,201 $ 35,303 $ 37,149 Accounts receivable, net 89,700 62,600 51,700 Merchandise inventory 113,500 82,500 52,000 Prepaid expenses 9,726 9,267 4,128 Plant assets, net 279,209 260,620 237,923 Total assets $ 522,336 $ 450,290 $ 382,900 Liabilities and Equity Accounts payable $ 127,460 $ 74,577 $ 49,532 Long-term notes payable secured by mortgages on plant assets 96,235 101,495 82,928 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash 36,194 43,603 43,630 Accounts receivable, net 103,832 76,305 58,767 Merchandise inventory 137,278 100,832 65,135 Prepaid expenses 11,656 11,332 4,897 Plant assets, net 337,022 307,568 277,271 Total assets 625,982 539,640 449,700 Liabilities and Equity Accounts payable 158,987 89,375 57,580 Long-term notes payable secured by mortgages on plant assets 116,508 122,876 98,390 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 187,987...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 29,388 $ 34,706 $ 37,252 Accounts receivable, net 89,566 61,975 47,721 Merchandise inventory 109,300 80,258 52,908 Prepaid expenses 9,952 9,389 4,058 Plant assets, net 275,303 256,352 226,961 Total assets $ 513,509 $ 442,680 $ 368,900 Liabilities and Equity Accounts payable $ 126,585 $ 77,057 $ 47,234 Long-term notes payable secured by mortgages on plant assets 94,609 104,871 79,896 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 35,985 $ 42,063 $ 42,114 Accounts receivable, net 89,700 62,100 52,000 Merchandise inventory 112,000 84,500 56,000 Prepaid expenses 11,588 11,041 4,679 Plant assets, net 342,870 310,764 258,207 Total assets $ 592,143 $ 510,468 $ 413,000 Liabilities and Equity Accounts payable $ 151,867 $ 88,857 $ 56,151 Long-term notes payable secured by mortgages on plant assets 114,663 120,930 94,011 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 30,400 $ 36,250 $ 38,200 Accounts receivable, net 86,700 63,000 50,000 Merchandise inventory 110,000 81,800 53,500 Prepaid expenses 10,750 9,300 4,500 Plant assets, net 277,000 248,500 230,000 Total assets $ 514,850 $ 438,850 $ 376,200 Liabilities and Equity Accounts payable $ 129,600 $ 75,750 $ 51,200 Long-term notes payable secured by mortgages on plant assets 97,500 101,250 83,800 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 35,049 $ 40,969 $ 41,831 Accounts receivable, net 103,593 70,985 57,464 Merchandise inventory 123,926 93,802 61,818 Prepaid expenses 11,175 10,541 4,648 Plant assets, net 314,421 290,741 261,039 Total assets $ 588,164 $ 507,038 $ 426,800 Liabilities and Equity Accounts payable $ 146,453 $ 86,546 $ 55,211 Long-term notes payable secured by mortgages on plant assets 111,681 116,619 96,209 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 24,733 $ 29,206 $ 31,031 Accounts receivable, net 72,416 52,143 39,752 Merchandise inventory 91,049 68,221 42,764 Prepaid expenses 8,046 7,667 3,346 Plant assets, net 231,518 211,523 190,407 Total assets $ 427,762 $ 368,760 $ 307,300 Liabilities and Equity Accounts payable $ 105,448 $ 62,944 $ 40,564 Long-term notes payable secured by mortgages on plant assets 78,007 86,511 69,272 Common stock,...