70.2K

Verified Solution

Link Copied!

Simon Companys year-end balance sheets follow.

At December 31	Current Yr			1 Yr Ago			2 Yrs Ago
Assets
Cash	$	31,300		$	34,200		$	37,000
Accounts receivable, net		89,000			62,400			56,100
Merchandise inventory		94,682			82,500			56,000
Prepaid expenses		10,650			10,084			3,376
Plant assets, net		329,368			300,816			157,524
Total assets	$	555,000		$	490,000		$	310,000
Liabilities and Equity
Accounts payable	$	136,813		$	81,154		$	41,738
Long-term notes payable secured by mortgages on plant assets		101,210			112,700			70,565
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		154,477			133,646			35,197
Total liabilities and equity	$	555,000		$	490,000		$	310,000

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

For Year Ended December 31	Current Yr						1 Yr Ago
Sales				$	721,500					$	583,100
Cost of goods sold	$	440,115					$	379,015
Other operating expenses		223,665						147,524
Interest expense		12,266						13,411
Income tax expense		9,380						8,747
Total costs and expenses					685,426						548,697
Net income				$	36,074					$	34,403
Earnings per share				$	2.22					$	2.12

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		0.34
Annual cash dividends per share 1 Year Ago		0.17

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.

Compute the return on common stockholders' equity for each year.

	Return On Common Stockholders Equity Choose Numerator: / Choose Denominator: = Return On Common Stockholders Equity Net income Preferred dividends / Average common stockholders equity = Return on common stockholders equity Current Year: $36,074 / = 0 % 1 Year Ago: $34,403 / = 0 %

Compute the price-earnings ratio for each year. (Round your answers to 2 decimal places.)

	Price-Earnings Ratio Choose Numerator: / Choose Denominator: = Price-Earnings Ratio Market price per common share / Earnings per share = Price-earnings ratio Current Year: / = 0 1 Year Ago: / = 0

PLEASE ASSIST, THIS IS MY SECOND TIME ASKING FOR HELP WITH THIS PROBLEM.

Answer & Explanation Solved by verified expert

See Answer