** Use the following information for the Quick Studies below. (Algo)

($ thousands)	Current Year	Prior Year
Net sales	$ 802,469	$ 453,554
Cost of goods sold	393,629	134,695

QS 13-8 (Algo) Common-size analysis LO P2

Determine the Prior Year and Current Year common-size percents for cost of goods sold using net sales as the base. (Enter the answers in thousands of dollars.)

** Simon Company's year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 37,596	$ 42,223	$ 44,876
Accounts receivable, net	107,897	74,644	60,426
Merchandise inventory	134,317	102,623	63,730
Prepaid expenses	11,870	11,310	5,036
Plant assets, net	333,050	307,760	274,732
Total assets	$ 624,730	$ 538,560	$ 448,800
Liabilities and Equity
Accounts payable	$ 152,447	$ 90,106	$ 57,464
Long-term notes payable	119,798	123,869	102,160
Common stock, $10 par value	163,500	162,500	163,500
Retained earnings	188,985	162,085	125,676
Total liabilities and equity	$ 624,730	$ 538,560	$ 448,800

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

1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable?

*** (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three-year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three-year period?

** The companys income statements for the current year and 1 year ago, follow.

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 812,149		$ 640,886
Cost of goods sold	$ 495,411		$ 416,576
Other operating expenses	251,766		162,144
Interest expense	13,807		14,740
Income tax expense	10,558		9,613
Total costs and expenses		771,542		603,073
Net income		$ 40,607		$ 37,813
Earnings per share		$ 2.50		$ 2.33

For both the Current Year and 1 Year Ago, compute the following ratios:

(1-a) Profit margin ratio. (1-b) Did profit margin improve or worsen in the Current Year versus 1 Year Ago? (2) Total asset turnover. (3-a) Return on total assets. (3-b) Based on return on total assets, did Simon's operating efficiency improve or worsen in the Current Year versus 1 Year Ago?

**Simon Companys year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 33,980	$ 39,719	$ 41,796
Accounts receivable, net	89,100	62,700	51,200
Merchandise inventory	111,500	82,500	52,000
Prepaid expenses	10,943	10,426	4,644
Plant assets, net	342,157	311,276	281,160
Total assets	$ 587,680	$ 506,621	$ 430,800
Liabilities and Equity
Accounts payable	$ 143,406	$ 83,907	$ 55,728
Long-term notes payable	108,274	114,192	93,303
Common stock, $10 par value	162,500	162,500	162,500
Retained earnings	173,500	146,022	119,269
Total liabilities and equity	$ 587,680	$ 506,621	$ 430,800

The companys income statements for the current year and one year ago follow. Assume that all sales are on credit:

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 763,984		$ 602,879
Cost of goods sold	$ 466,030		$ 391,871
Other operating expenses	236,835		152,528
Interest expense	12,988		13,866
Income tax expense	9,932		9,043
Total costs and expenses		725,785		567,308
Net income		$ 38,199		$ 35,571
Earnings per share		$ 2.35		$ 2.19

(1-a) Compute days' sales uncollected. (1-b) For each ratio, determine if it improved or worsened in the current year.

**(2-a) Compute accounts receivable turnover. (2-b) For each ratio, determine if it improved or worsened in the current year.

*(3-a) Compute inventory turnover. (3-b) For each ratio, determine if it improved or worsened in the current year.

*(4-a) Compute days' sales in inventory. (4-b) For each ratio, determine if it improved or worsened in the current year.

*Simon Companys year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 30,558	$ 37,177	$ 37,207
Accounts receivable, net	89,469	65,059	49,610
Merchandise inventory	111,354	84,286	55,002
Prepaid expenses	10,343	9,376	4,261
Plant assets, net	286,770	259,700	237,420
Total assets	$ 528,494	$ 455,598	$ 383,500
Liabilities and Equity
Accounts payable	$ 134,227	$ 78,536	$ 51,128
Long-term notes payable	101,344	103,740	85,601
Common stock, $10 par value	162,500	162,500	162,500
Retained earnings	130,423	110,822	84,271
Total liabilities and equity	$ 528,494	$ 455,598	$ 383,500

The companys income statements for the current year and one year ago, follow.

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 687,042		$ 542,162
Cost of goods sold	$ 419,096		$ 352,405
Other operating expenses	212,983		137,167
Interest expense	11,680		12,470
Income tax expense	8,932		8,132
Total costs and expenses		652,691		510,174
Net income		$ 34,351		$ 31,988
Earnings per share		$ 2.11		$ 1.97

13-9 (1) Compute debt and equity ratio for the current year and one year ago.

**(2-a) Compute debt-to-equity ratio for the current year and one year ago. (2-b) Based on debt-to-equity ratio, does the company have more or less debt in the current year versus one year ago?

**(3-a) Compute times interest earned for the current year and one year ago. (3-b) Based on times interest earned, is the company more or less risky for creditors in the Current Year versus 1 Year Ago?

**Simon Companys year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 30,000	$ 35,000	$ 38,000
Accounts receivable, net	88,700	62,000	51,000
Merchandise inventory	110,500	82,600	54,000
Prepaid expenses	10,750	9,350	4,500
Plant assets, net	280,000	250,500	229,000
Total assets	$ 519,950	$ 439,450	$ 376,500
Liabilities and Equity
Accounts payable	$ 128,800	$ 73,500	$ 50,600
Long-term notes payable	96,500	101,250	82,800
Common stock, $10 par value	160,500	160,500	160,500
Retained earnings	134,150	104,200	82,600
Total liabilities and equity	$ 519,950	$ 439,450	$ 376,500

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

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 755,000		$ 620,000
Cost of goods sold	$ 453,000		$ 396,800
Other operating expenses	234,050		142,600
Interest expense	12,300		13,300
Income tax expense	9,550		8,775
Total costs and expenses		708,900		561,475
Net income		$ 46,100		$ 58,525
Earnings per share		$ 2.87		$ 3.65

For both the Current Year and 1 Year Ago, compute the following ratios:

(1-a) Compute profit margin ratio for the current year and one year ago. (1-b) Did profit margin improve or worsen in the Current Year versus 1 Year Ago?

**(2) Compute total asset turnover for the current year and one year ago.

*(3-a) Compute return on total assets for the current year and one year ago. (3-b) Based on return on total assets, did Simon's operating efficiency improve or worsen in the Current Year versus 1 Year Ago?