Simon Company\'s year-end balance sheets follow At December 31 Assets Cash Accou

Question

Simon Company's year-end balance sheets follow At December 31 Assets Cash Accounts recelvable, net Merchandise Inventory Prepald expenses Piant assets, net Total assets 2016 2015 2014 $30,400 35,750 $ 37.200 49.500 81,200 54,500 5,400 281000 252,500 225,000 $523,900 442,300 371,600 89,100 112,500 10,900 63,500 9.350 Liabilities and Equity Accounts payable Long-term notes payable secured by $130,000 73,250 51,200 98,000 98,750 80,200 mortgages on plant assets Common stock, $10 par value Retained earnings Total lilabilities and equity 62,500 162,500 162,500 77700 $523,900 442,300 $371,600 133,400107800 The company's income statements for the years ended December 31, 2016 and 2015, follow For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses Net Income 2016 2015 $ 755,000 610,000 453,000 211,400 11,500 9,600 $ 396,500 146,400 13,000 8,975 685,500 $ 69,500 $4.28 564.875 $ 45,125 $2.78 Earnings per share Evaluate the company's efficiency and profitability by computing the following for 2016 and 2015.

Explanation / Answer

1.Profit Margin

2016

= (Net Income / Sales) * 100

= ($ 69,500 / $7,55,000) * 100

= 9.20%

Numerator = $ 69,500

Denominator = $7,55,000

2015

= (Net Income / Sales) * 100

= ($ 45,125 / $6,10,000) * 100

= 7.40%

Numerator = $ 45,125

Denominator = $6,10,000

2.Total Asset Turnover

2016

= Sales / Average Total Assets

= $755000 / [($523900+$442300)/2]

= $755000 / $483100

= 1.56 Times

Numerator = $755000

Denominator = $483100

2015

= Sales / Average Total Assets

= $564875 / [($442300+$371600)/2]

= $564875 / $406950

= 1.39 Times

Numerator = $564875

Denominator = $406950

3.Return on Total Assets

2016

= Net Income / Average Total Assets

= $69500 / [($523900+$442300)/2]*100

= $69500 / $483100

= 14.39 %

Numerator = $69500

Denominator = $483100

2015

= Net Income / Average Total Assets

= $45125 / [($442300+$371600)/2] * 100

= $45125 / $406950 * 100

= 11.09%

Numerator = $45125

Denominator = $406950

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