0 You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked a you to perform a comprehensive analysis of the company's financial statements, including comparing Lydex's performance to its major competitors. The company's financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assetst Canh $ 960,000 $ 1,260,000 Marketable securities 300,000 Accounts receivable, net 2,700,000 1,800,000 Inventory 3,900,000 2,400,000 Prepaid expenses 240,000 180,000 Total current asset 7,800,000 5,940,000 Plant and equipment, net 9,300,000 8,940,000 Total assets $17,100,000 $14,880,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,900,000 $ 2,760,000 Note payable, 105 3,600,000 3.000.000 Total liabilities 7.500.000 5,760,000 Stockholdersequity Common stock, 578 par value 7,800,000 7.800.000 Retained earnings 1,800,000 1320,000 Total stockholders' equity 9,600,000 9,120.000 Total liabilities and stockholders' equity 517,100,000 $14,880,000 Tydex company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,750,000 $12,480,000 Cost of goods sold 12.600.000 9.900.000 Gross margin 3,150,000 2,580,000 Selling and administrative expenses 1.590.000 1,560.000 ASARAN LOSS margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (301) Net income Common dividends Net income retained Beginning retained earnings Ending retained earning 3,450, VUU 2,580, VVU 1,590,000 1.560.000 1,560,000 1,020,000 360,000 300,000 1.200,000 720,000 360,000 216,000 840,000 504,000 360,000 252,000 480,000 252,000 1,320,000 1,068,000 $ 1,800,000 $1,320,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Times Interest earned ratio Price-earnings ratio 2.3 1.2 30 days 60 days 9.55 0.65 5.7 10 Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.) a. The times interest earned ratio b. The debt-to-equity ratio c. The gross margin percentage d. The return on total assets. (Total assets at the beginning of last year were $12.960,000.) Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equity ratio c. The gross margin percentage. d. The return on total assets. (Total assets at the beginning of last year were $12,960,000.) e. 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.) f. Is the company's financial leverage positive or negative? Answer is not complete. b G This Year 5.353 80.75 20.0 % 6.93% 12.1 % The times interesteamed ratio The debt-to-equity ratio The gross margin percentage The return on total assets The return on equity Is the company's financial leverage positive or negativo? Last Year 6.02 68.60 25.03% 7.7 % 12.5% d e 1