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Required information Skip to question [ The following information applies to the questions displayed below. ] Lydex Company s financial statements for the last two

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[The following information applies to the questions displayed below.]
Lydex Companys financial statements for the last two years are as follows:
Lydex Company
Comparative Balance Sheet
This Year Last Year
Assets
Current assets:
Cash $ 960,000 $ 1,260,000
Marketable securities 0300,000
Accounts receivable, net 2,700,0001,800,000
Inventory 3,900,0002,400,000
Prepaid expenses 240,000180,000
Total current assets 7,800,0005,940,000
Plant and equipment, net 9,300,0008,940,000
Total assets $ 17,100,000 $ 14,880,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities $ 3,900,000 $ 2,760,000
Note payable, 10%3,600,0003,000,000
Total liabilities 7,500,0005,760,000
Stockholders' equity:
Common stock, $ 78 par value 7,800,0007,800,000
Retained earnings 1,800,0001,320,000
Total stockholders' equity 9,600,0009,120,000
Total liabilities and stockholders' equity $ 17,100,000 $ 14,880,000
Lydex Company
Comparative Income Statement and Reconciliation
This Year Last Year
Sales (all on account) $ 15,750,000 $ 12,480,000
Cost of goods sold 12,600,0009,900,000
Gross margin 3,150,0002,580,000
Selling and administrative expenses 1,590,0001,560,000
Net operating income 1,560,0001,020,000
Interest expense 360,000300,000
Net income before taxes 1,200,000720,000
Income taxes (30%)360,000216,000
Net income 840,000504,000
Common dividends 360,000252,000
Net income retained 480,000252,000
Beginning retained earnings 1,320,0001,068,000
Ending retained earnings $ 1,800,000 $ 1,320,000
The following financial data and ratios are typical of companies in Lydex Companys industry:
Current ratio 2.3
Acid-test ratio 1.2
Average collection period 30 days
Average sale period 60 days
Return on assets 9.5%
Debt-to-equity ratio 0.65
Times interest earned ratio 5.7
Price-earnings ratio 10
Required:
1. To assess the companys performance in terms of debt management and profitability, compute the following for this year and last year:
Note: Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.
The times interest earned ratio.
The debt-to-equity ratio.
The gross margin percentage.
The return on total assets. (Total assets at the beginning of last year were $12,960,000.)
The return on equity. (Stockholders equity at the beginning of last year totaled $9,048,000. There has been no change in common stock over the last two years.)
Is the companys financial leverage positive or negative?

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