Ch 13: Homework - Question 8

Use the following information for the Exercises below. (Algo)

[The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 33,336	$ 38,966	$ 40,586
Accounts receivable, net	94,685	67,509	53,043
Merchandise inventory	119,048	87,407	56,485
Prepaid expenses	10,843	10,229	4,376
Plant assets, net	307,101	282,969	251,410
Total assets	$ 565,013	$ 487,080	$ 405,900
Liabilities and Equity
Accounts payable	$ 137,874	$ 83,140	$ 53,043
Long-term notes payable	108,347	109,788	90,601
Common stock, $10 par value	163,500	163,500	162,500
Retained earnings	155,292	130,652	99,756
Total liabilities and equity	$ 565,013	$ 487,080	$ 405,900

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		$ 734,517		$ 579,625
Cost of goods sold	$ 448,055		$ 376,756
Other operating expenses	227,700		146,645
Interest expense	12,487		13,331
Income tax expense	9,549		8,694
Total costs and expenses		697,791		545,426
Net income		$ 36,726		$ 34,199
Earnings per share		$ 2.26		$ 2.10

Additional information about the company follows.

Common stock market price, December 31, Current Year	$ 28.00
Common stock market price, December 31, 1 Year Ago	26.00
Annual cash dividends per share in Current Year	0.20
Annual cash dividends per share 1 Year Ago	0.10

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 7, which company has higher market expectations for future growth?

Compute the return on equity for each year. Compute the dividend yield for each year. (Round your answers to 2 decimal places.) ompute the price-earnings ratio for each year. (Round your answers to 2 decimal places.) 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