Question

Exercise 13-10 Efficiency and profitability analysis LO P3 [The following information applies to the questions displayed below.j 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 $ 32,000 $ 35,750 $ 37,800 88,700 61,500 50,500 112,500 82,000 53,500 10,450 9,200 4,900 279,000 250,000 229,000 $522,650 $438,450 $ 375,700 $128,400 $ 73,500 $ 50, 600 97,500 98,000 83,200 162,000 162,000 162,000 134,750 104,950 79,900 $522,650 $438,450 $375,700 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 $725,000 $442,250 203,000 11,400 9,450 666,100 $ 58,900 $ 3.64 2016 $ 590,000 $365,800 141,600 13,200 8,650 529,250 $ 60,750 3.75 Evaluate the company's efficiency and profitability by computing the following for 2017 and 2016. Exercise 13-10 Part 1 (1) Profit margin ratio. Profit Margin Ratio 1 Choose Denominator: Choose Numerator: = Profit Margin Ratio = Profit margin ratio 2017 2016

Answer 1

Profit margin Profit margin / Denominator Numerator Profit margin / Net sales Net Income 725000 2017 58900 8.1 / 60750 2016 590000 10.3 Total Assets Turn over / Denominator Total Assets Turn over Numerator Avg Total Assets Net Sales Total Assets Turn over times 725000 480550 2017 1.5 times 2016 590000 407075 1.4 Return on Total Assets Denominator Return on Total Assets Numerator Avg Total assets Net income Return on Total Assets 2017 58900 480550 12.3 2016 60750 407075 14.9