Question

Simon Company's year-end balance sheets follow. 2017 2016 2015 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 $ 31,300 $ 34,400 89,400 64,000 77,174 85,000 10,950 10,185 356,176 291,415 $565,000 $485,000 $ 36,600 55,000 51,200 3,308 163,892 $ 310,000 $142,092 $ 81,965 $ 40,511 106,220 189,319 162,500 162,500 154,188 131,216 $565,000 $485,000 69,195 162,500 37,794 $ 310,000 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 expenses Net income Earnings per share 2017 $734,500 $ 448,845 227,695 12,487 9,549 697,776 $ 36,724 $ 2.26 2016 $ 577,150 $375,148 146,019 13,274 8,657 543,098 $ 34,052 $ 2.10 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 0.40 6.20 To help evaluate the company's profitability, compute the following ratios for 2017 and 2016: 1. Return on common stockholders' equity. 2. Price-earnings ratio on December 31. 3. Dividend yield. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the return on common stockholders' equity for each year. Return On Common Stockholders' Equity 1 Choose Denominator: Choose Numerator: Return On Common Stockholders' Equity Return on common stockholders' equity 2017 2016 < Required 1 Required 2 >

Answer 1

Return on common stockholders' equity Choose Numerator Choose Return on common Denominator = stockholders Equity Preferred Average common Return on common Net Income come - - Dividende / stockholders = stockholders' Equity equity 2017 $36,724 - $0 $305,202= 12.03 % 2016 $34,052 - $0 $247,005 = 13.79 % Calculation: Average common stockholders' equity = (Beginning common Stock- holders Equity & Ending common stockholderi equity) = 2) Common stockholders' equity = (Common stock & Retained Earrings) Common stockholders' equity 2017 = ($162,500+ $154,188) = $ 316,688 Common stockholders equity 2016 = ($162, Soo + $131,216) = $293,76 common stockholders equity 2015 =($ 162, 5oot $37,794) = $ 200,294

Average common stockholders' equity 2017 =($293,716 + $316, 688) + 2] - $ 610,404 & 2 = $305,202 Average common stockholders equity 2016 =2$200,294 + $ 293,716):2) 218200, 294 + $ 293,716) + 2] - $ 494,010 & 2 = $247,005 T = L Price Earnings Ratio Choose Choose Numerator / Denominator Market Price per common Earnings per Share Share $ 31:00 $2.26 $29.00 $2.10 Price- Earnings Ratio Price - Earnings Ratio = 2017 13.72 13.81 2016 13 Dividend Yield Choose Choose Numerator I Denominator = Dividend Yield Annual cash dividends Market Price Dividend Yield per share 11 per share $0.40 1 $31.00 = 1.29 % $ 0. 20 1/ $29.00 = 0.69 % 2017 2016