Question

Required information Exercise 13-10 Efficiency and profitability analysis LO P3 (The following information applies to the questions displayed below.) Simon Company's year-end balance sheets follow. 2017 2016 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 s mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 30,400 $ 35,000 $ 37,800 87,100 61,500 51,000 111,000 83,600 53,500 10,550 9,4504 ,900 281,000 258,000 233,000 $520,050 $447,550 $380,200 | 8,400 $ 74,250 $ 50,600 97,00099,500 83,000 160,500 160,500 160,500 134, 150 113,300 86,100 $520,050 $447,550 $380,200 The company's income statements for the years ended December 31, 2017 and 2016, follow. For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expen Net income. Earnings per share 2017 $705,000 $430,050 204,450 12,000 9,500 656,000 $ 49,000 2016 $ 580,000 $365,400 139,200 13,300 8,600 526,500 53,500 $ 3.05 3.33 Evaluate the company's efficiency and profitability by computing the following for 2017 and 2016.

Answer 1

(1) Profit margin ratio. Profit Margin Ratio Choose Numerator: I Choose Denominator: = Net income | Net sales 2017 $49,000 1 $705,000 = 2016 $53,5001 $580,000 Profit Margin Ratio Profit margin ratio 7.0 % 9.2 % (2) Total asset turnover. Choose Numerator: Net sales $705,000 $580,000 Total Asset Turnover | Choose Denominator: 1 Average total assets 1 $483,800 = $413.875 Total Asset Turnover Total asset turnover 1.5 times 1.4 times 2017 2016 (3) Return on total assets. Return On Total Assets Choose Numerator: I Choose Denominator: Net income 1 Average total assets 2017 $49,000 $483,800 2016 $53,500 1 $413.875 = Return On Total Assets Return On Total Assets = 10.1 % 12.9 % S 1 Explanation: Average total assets = [(Beginning total assets + Ending total assets) = 2] 2017: [($520,050 + $447,550) = 2] = $483,800 2016: [($447,550 + $380,200) = 2] = $413,875