Simon Company\'s year-end balance sheets follow At December 31 Assets Cash Accou
ID: 2332869 • Letter: S
Question
Simon Company's year-end balance sheets follow 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 2017 2016 32,000 34,800 36,100 88,70064,700 51,10e 15,126 83,20058,300 10,345 9,879 3,734 403,829 292,421 280,766 $550,600 $485,000 35e,e0 $136,95e s 81,145 47,124 mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 104,434 109,319 79,671 162, 500162, 500 162,580 146,116 132,836 6,785 $550,00 $485,000 35e,800 The company's income statements for the years ended December 31, 2017 and 2016, follow For Year Ended December 31 Sales $715,000 s 577,15e Cost of goods sold Other operating expenses Interest expense Income taxes $436,150 221,650 12,155 9,295 $ 375,148 146,019 13, 274 8,657 O 679,258 35,750 $ 2.20 Total costs and expenses Net income 543,098 $ 34,052 $ 2.10 Earnings per share Additional information about the company follows. Common stock market price, December 31, 2017 Common stock market price, December 31, 2016 Annual cash dividends per share in 2017 Annual cash dividends per share in 2016 $ 31.00 29.00 0.32 0.16 K Prey 10 of 10Explanation / Answer
Compute return on common stockholders' equity:
Return On Common Stockholders’ Equity
Choose Numerator:
/
Choose Denominator:
=
Return On Common Stockholders’ Equity
Net income
–
Preferred dividends
/
Average common stockholders’ equity
=
Return on common stockholders’ equity
2017
$35,750
–
$0
/
$303,593
=
$11.78
%
2016
$34,052
–
$0
/
$260,886
=
$13.05
%
2017
2016
2015
Common stock, $10 par value
$162,500
$162,500
$162,500
Add: Retained earnings
$146,116
$132,036
$60,705
Total Stockholders’ equity
$310,633
$296,552
$225,220
Average stockholders’ equity (2017+2016)÷2, (2016+2015) ÷2
$303,593
$260,886
Compute price-earnings ratio for each year:
Price-Earnings Ratio
Choose Numerator:
/
Choose Denominator:
=
Price-Earnings Ratio
Market price per common share
Earnings per share
Price-earnings ratio
2017
31
/
2.2
=
14.09
2016
29
/
2.1
=
13.81
Compute dividend yield for each year:
Dividend Yield
Choose Numerator:
/
Choose Denominator:
=
Dividend Yield
Annual cash dividend per share
/
Market price per share
=
Dividend yield
2017
0.32
/
31
=
1.03
%
2016
0.16
/
29
=
0.55
%
Return On Common Stockholders’ Equity
Choose Numerator:
/
Choose Denominator:
=
Return On Common Stockholders’ Equity
Net income
–
Preferred dividends
/
Average common stockholders’ equity
=
Return on common stockholders’ equity
2017
$35,750
–
$0
/
$303,593
=
$11.78
%
2016
$34,052
–
$0
/
$260,886
=
$13.05
%
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