Complete P16-15 on page 754 of Managerial Accounting and present your responses in an Excel spreadsheet. For both this year and last year: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. 3. Comment on the results of your analysis. I'm not so much looking for the comments (#3) as I am an excel spreadsheet that lists the required data.

Analysis Basics Complete P16-15 on page 754 of Managerial Accounting and present your responses in an Excel spreadsheet. Helen McGuire, who just a year ago was appointed president of Lydex Company, argues that although the company has had a \"spotty\" record in the past, it has \"turned the corner,\" as evidenced by a 25% jump in sales and by a greatly improved earnings picture between last year and this year. McGuire also points out that investors generally have recognized the improving situation at Lydex, as shown by the increase in market value of the company's common stock, which is currently selling for $72 per share (up from $40 per share last year). McGuire feels that with her leadership and with the modernized equipment that the $3,000,000 loan will permit the company to buy, profits will be even stronger in the future. McGuire has a reputation in the industry for being a good manager who runs a \"tight\" ship. Not wanting to botch your first assignment, you decide to generate all the information that you can about the company. You determine that the following ratios are typical of companies in Lydex Company's 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. You decide first to assess the rate of return that the company is generating. Compute the following for both this year and last year: a. The return on total assets. (Total assets at the beginning of last year were $12,960,000.) b. The return on common stockholders' equity. (Stockholders' equity at the beginning of last year totaled $9,048,000. There has been no change in preferred or common stock over the last two years.) c. Is the company's financial leverage positive or negative? Explain. 2. You decide next to assess the well-being of the common stockholders. For both this year and last year, compute: a. The earnings per share. b. The dividend yield ratio for common stock. c. The dividend payout ratio for common stock. d. The price-earnings ratio. How do investors regard Lydex Company as compared to other companies in the industry? Explain. e. The book value per share of common stock. Does the difference between market value per share and book value per share suggest that the stock at its current price is a bargain? Explain. f. The gross margin percentage. 3. You decide, finally, to assess creditor ratios to determine both short-term and long-term debt paying ability. For both this year and last year, compute: a. Working capital. b. The current ratio. c. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,560,000.) e. The average sale period. (The inventory at the beginning of last year totaled $1,920,000.) f. The debt-to-equity ratio. g. The times interest earned ratio. 4. Make a recommendation to your supervisor as to whether the loan should be approved. PROBLEM 16-15 Common-Size Financial Statements [LO1] Refer to the financial statement data for Lydex Company given in Problem 16-14. PROBLEM 16-14 Comprehensive Ratio Analysis [LO2, LO3, LO4] You have just been hired as a loan officer at Slippery Rock State Bank. Your supervisor has given you a file containing a request from Lydex Company, a manufacturer of safety helmets, \"How Well Am I Doing?\" Financial Statement Analysis 753 for a $3,000,000, five-year loan. Financial statement data on the company for the last two years follow: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 960,000 $ 1,260,000 Marketable securities . . . . . . . . . . . . . . . . . 0 300,000 Accounts receivable, net . . . . . . . . . . . . . . 2,700,000 1,800,000 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900,000 2,400,000 Prepaid expenses. . . . . . . . . . . . . . . . . . . . 240,000 180,000 Total current assets . . . . . . . . . . . . . . . . . . . . 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, 10% . . . . . . . . . . . . . . . . . . 3,600,000 3,000,000 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 7,500,000 5,760,000 Stockholders' equity: Preferred stock, 8%, $30 par value . . . . . . 1,800,000 1,800,000 Common stock, $80 par value . . . . . . . . . . 6,000,000 6,000,000 Retained earnings . . . . . . . . . . . . . . . . . . . 1,800,000 1,320,000 Total stockholders' equity . . . . . . . . . . . . . . . . 9,600,000 9,120,000 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 . . . . . . . . . . . . . . . . . . . . . 12,600,000 9,900,000 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,000 2,580,000 Selling and administrative expenses . . . . . . . 1,590,000 1,560,000 Net operating income . . . . . . . . . . . . . . . . . . . 1,560,000 1,020,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . 360,000 300,000 Net income before taxes . . . . . . . . . . . . . . . . 1,200,000 720,000 Income taxes (30%) . . . . . . . . . . . . . . . . . . . . 360,000 216,000 Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . 840,000 504,000 Dividends paid: Preferred dividends . . . . . . . . . . . . . . . . . . 144,000 144,000 Common dividends . . . . . . . . . . . . . . . . . . 216,000 108,000 Total dividends paid . . . . . . . . . . . . . . . . . . . . 360,000 252,000 Net income retained. . . . . . . . . . . . . . . . . . . . 480,000 252,000 Retained earnings, beginning of year . . . . . . 1,320,000 1,068,000 Retained earnings, end of year . . . . . . . . . . . $ 1,800,000 $ 1,320,000 1. Present the balance sheet in common-size format. Solution: Computation of the Common size balance sheet Common size balance sheet Assets This year Current assets: Cash $960,000 Marketable securities $Accounts receivable, net $2,700,000 Inventory $3,900,000 Prepaid expenses $240,000 Total current assets $7,800,000 Plant and equipment, net $9,300,000 Total assets $17,100,000 Liabilities and Stockholders' Equity Liabilities: $3,900,000 Current liabilities $3,600,000 Note payable, 10% $7,500,000 Total liabilities Stockholders' equity: Preferred stock, 8%, $30 par value $1,800,000 Common stock, $80 par value $6,000,000 Retained earnings $1,800,000 Total stockholders' equity $9,600,000 Total liabilities and stockholders' equity $17,100,000 Last year 5.61% 0.00% 15.79% 22.81% 1.40% 45.61% 54.39% 100.00% $1,260,000 $300,000 $1,800,000 $2,400,000 $180,000 $5,940,000 $8,940,000 $14,880,000 8.47% 2.02% 12.10% 16.13% 1.21% 39.92% 60.08% 100.00% 22.81% 21.05% 43.86% $2,760,000 $3,000,000 $5,760,000 18.55% 20.16% 38.71% 10.53% 35.09% 10.53% 56.14% 100.00% $1,800,000 $6,000,000 $1,320,000 $9,120,000 $14,880,000 12.10% 40.32% 8.87% 61.29% 100.00% Last year $12,480,000 $9,900,000 $2,580,000 $1,560,000 $1,020,000 $300,000 $720,000 $216,000 $504,000 100.00% 79.33% 20.67% 12.50% 8.17% 2.40% 5.77% 1.73% 4.04% 2. Present the income statement in common-size format down through net income. Solution: Computation of the Common size income statement Common size income statement Lydex Company Comparative Income Statement and Reconciliation This year Sales (all on account) $15,750,000 100.00% Cost of goods sold $12,600,000 80.00% Gross margin $3,150,000 20.00% Selling and administrative expenses $1,590,000 10.10% Net operating income $1,560,000 9.90% Interest expense $360,000 2.29% Net income before taxes $1,200,000 7.62% Income taxes (30%) $360,000 2.29% Net income $840,000 5.33% Dividends paid: Preferred dividends $144,000 Common dividends $216,000 Total dividends paid $360,000 Net income retained $480,000 Retained earnings, beginning of year $1,320,000 Retained earnings, end of year $1,800,000 $144,000 $108,000 $252,000 $252,000 $1,068,000 $1,320,000 3. Comment on the results of your analysis. Solution: Analysis The total assets of the company has been increased due to increase in inventory and current assets. The current liabilities to total assets percentage increased nearly 6% due to increase in current assets and notes payable. Due to increase in retained earnings, the total stock holder's equity has been decreased. The sales has increased more when compare to the increase in cost of goods sold, hence the gross margin also increased from previous year. There is a slight increase in selling and administrative expenses and overall the net income has increased