Question

UITIUIT Lurripuity » ycuicuu wuIUILE JUICE Current Yr 1 Yr Ago 2 Yrs Ago 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 $ 30,800 89, 100 112,500 10,300 280,000 $522,700 $ 35,250 $ 38,400 62,500 50,000 82,000 54,500 9,450 5,200 249,000 229,000 $438,200 $ 377,100 $128,400 $ 73,500 $ 51,200 95,500 164,000 134,800 $522,700 99,750 80,400 164,000 164,000 100,950 81,500 $438,200 $ 377,100 The company's income statements for the Current Year and 1 Year Ago, follow. For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income tax expense Total costs and expenses Net income Earnings per share Current Yr $715,000 $436,150 221,650 11,200 9,600 678,600 $ 36,400 $ 2.22 1 Yr Ago $630,000 $409,500 157,500 12,900 8,675 588,575 $ 41,425 $ 2.53

Answer 1

3A)

Calculate return on total assets for the current year and one year ago as follows:

Return on Total Assets
	Choose Numerator:	/	Choose Denominator	=	Return on Total Assets
	Net income		Average total assets		Return on total assets
Current year	36400		480450		7.58%
1 year ago	41425		407650		10.16%

Above figures have been calculated in the following manner:

Return on Total Assets
	Choose Numerator:	/	Choose Denominator	=	Return on Total Assets
	Net income		Average total assets		Return on total assets
Current year	36400		=(522700+438200)/2		=36400/480450
1 year ago	41425		=(438200+377100)/2		=41425/407650

3B)

The return on total assets decreased from 10.16% to 7.58%. Therefore, it can be concluded that Simon's operating efficiency worsen in the current year versus 1 year ago.