1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for this year and last year: 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 $13,000,000) e. in the return on equity. (stockholders equity at the beginning of last year totaled $8,080,300. there has been no change in common stock over the last two years.) f. is the company's financial leverage positive or negative?

You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked 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 $ 899,000 2,420,000 3,530,000 240,000 7,080, eee 9,380,000 $ 16,468,080 $ 1,130, eee 300,000 1,520,000 2,380, eee 188,888 5,430,000 8,980, eee $ 14,410, cee Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% Total liabilities Stockholders' equity: Common stock, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 3,940, eee 3,620, eee 7,560, eee $ 2,848, eee 3, 220, eee 5,868, eee 7,000,000 1,900,000 8,980,000 $ 16,460, cee 7, eee, eee 1,550,000 8,550, eee $ 14,410,000 Lydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,790, eee Cost of goods sold 12,632, eee Gross margin 3,158, eee Selling and administrative expenses 1,796, eee Net operating income 1,362,eee Interest expense 362, e80 Net income before taxes 1, eee, eee Income taxes (30%) 3e8,eee Net income 700,000 Common dividends 350,000 Net income retained 350,000 Beginning retained earnings 1,550,000 Ending retained earnings $ 1,980,000 Last Year $ 12,888, eee 9,660, eee 3,228, eee 1,576, eee 1,644,280 302,080 1,342, eee 402,680 939, 480 469, 700 469,789 1,280, 380 $ 1,550, eee 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. 4e days 60 days 8.5% 0.7 5.8 10