Question

Simon Company's year-end balance sheets follow. Current Yr 1 Yr Ago 2 Yrs Ago At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 31,400 86,400 110,000 10,850 279,000 $ 517,650 $ 35,500 $ 37,800 64,000 50,000 81,200 53,000 9,300 4,900 255,000 227,000 $445,000 $ 372,700 $129,600 $ 73,750 $ 50,200 96,500 161,000 130,550 $ 517,650 100,000 81,400 161,000 161,000 110,250 80,100 $445,000 $ 372,700 The company's income statements for the Current Year and 1 Year Ago, follow For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income tax expense Total costs and expenses Net income Current Yr $ 785,000 $ 455,300 243,350 11,700 9,350 719,700 $ 65,300 1 Yr Ago $ 620,000 $390, 600 142,600 13,100 8,650 554,950 $ 65,050 Earnings per share $ 4.06 $ 4.04 For both the Current Year and 1 Year Ago, compute the following ratios (3-a) Return on total assets. (3-6) Based on return on total assets, did Simon's operating efficiency improve or worsen in the Current Year versus 1 Year Ago? Complete this question by entering your answers in the tabs below. < Prey 13 of 15 Next >

Answer 1

Question 3-a
Return on Total Assets
	Net Income (Return)	/	Total Assets	Return on total assets
Current Year	65,300	/	517,650	12.61%
One Year Ago	65,050	/	445,000	14.62%
Question 3-b
Since the return on total assets in current year is lesser than previous year, it is
clear that operating efficiency of Simon has worsen.