Simon Companys yearend balance sheets follow At December 31

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 2017201 6 2015 $ 31,800 34,500 36,700 88,900 62,500 54,400 57,967 82,400 56,70e 10,650 9,135 4,305 365, 683 246,465 227,895 $555,000 $435,000 $380, e00 $138,195 73,515 $ 50,160 mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 107,470 99,049 83,980 162 , 500 162 , 5ee 162, 5ee 146,835 99,936 83,360 $555,00e $435,000 $380,000

Solution

a) Return on Common Shareholder Equity Numerator Denominator Return on Common Shareholder Equity Net Income - Preferred Dividend / Average common stockholders’ equity = Return on Common Shareholder Equity 2017 $36,074.00 - $0.00 / $285,885.50 = 12.62% 2016 $30,541.00 - $0.00 / $254,148.00 = 12.02% Denominator = Average Shareholders\' equity Shareholder equity = Common stock + retained earnings Common stock + Retained Earnings = Shareholder equity 2017 $162,500.00 + $146,835.00 = $309,335.00 2016 $162,500.00 + $99,936.00 = $262,436.00 2015 $162,500.00 + $83,360.00 = $245,860.00 b) Price Earning Ratio Numerator / Denominator = Price Earning Ratio Market Price / Earning Per Share Price Earning Ratio 2017 $32.00 / $2.22 = 14.41 2016 $30.00 / $1.88 = 15.96 c) Dividend Yield Numerator Denominator ( Market price) Dividend yield Annual dividend per share / Market Price = Dividend yield 2017 $0.36 / $32.00 = 1.13% 2016 $0.18 / $30.00 = 0.60%