Question

E E ALT lew Rom - 12 A A Aa A Uab X, X APA AaBb CcDc AaBb CcDc Aab AaBbccL nou 1 Normal 1 No Spac... Heading 1 Heading 2 Title Replace Select Font Paragraph Styles Editing Simon Company's year end balance sheets follow Additional information about the company follows Current 1 E Age 2 ago Common stock market price, December 31, Current $33.00 Yen Common stock market price, December 31, 1 Year Ago 31.00 Annual cash dividends per share in Current Year 0.26 Annual cash dividends per share 1 Year ago 0.13 At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant anseta, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Cosmon stock, $10 par value Retained earnings Total liabilities and equity $ 31,300 $ 34,100 $ 36,300 89, 800 64,000 54,100 66, 688 62, 600 53,200 11, 1929,981 4,029 396,020 299, 319 222,371 $ 595,000 $490,000 $370,000 For both the Current Year and 1 Year Ago, compute the following ratios $ 143,710 $ 81,992 $ 47,863 110,741 112,700 80,952 162,500 162,500 162,500 178,049 132, 818 78,685 $ 595,000 $490,000 $370,000 1. Return on common stockholders' equity 2. Price-earnings ratio on December 31 2a. Asumine Simon's competitor has a price camins ratio of 7, which company has higher market expectations for future growth? 3. Dividend yield The company's income statements for the Current Year and 1 Year Ago follow. 1 % Ago 5583, 100 For Year Ended December 31 Current XE Sales $773,500 Cost of goods aold $471,835 other operating expenses 239,785 Interest expense 13,150 Income tax expense 10,056 Total costs and expenses 734, 826 Net income $ 38, 674 Earnings per share $ 2.38 $379,015 147.524 13, 411 8,747 548, 697 $ 34,403 $ 2.12 words X Focus ype here to search

Answer 1

EPS Market Price Cash Dividend Net Income ANALYSIS OF DETAILS PROVIDED Current Year Previous Year $ 2.38 $ 2.12 $ 33.00$ 31.00 $ 0.26 $ 0.13 $ 38,674.00$ 34,403.00 Common Stock Retained Earnings Stockholder's Equity $1,62,500.00 $1,62,500.00 $ 1,78,049.00 $ 1,32,818.00 $3,40,549.00 $ 2,95,318.00 Return on Common stockholder's Equity 11.3564% 11.6495% Price Earning Ratio 13.86554622 times 14.62264151 times Dividend Yield 0.7879% 0.4194%

Answer to part 1, 2 and 3 are captured in the image

2(a) The competitor has Price earning ratio of 7 times. Higher PE ratio represents higher growth prospects in the future because investors are willing to pay high market price for a comparative lower value of earning per share. Therefore, Simon has higher market expectation for future growth.

Formulas Used :

1. Return on Common stockholder's Equity = (Net Income / Stockholder's Equity) * 100
2. Price Earning Ratio = Market Price / Earnings per share (higher the better)
3. Dividend Yield Ratio = (Dividend per Share / Market Price) * 100