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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 Assets Current assets: Cash $ 920,000 $ 1,250,000 Marketable securities 300,000 Accounts receivable, net 2,540,000 1,640,000 Inventory 3,560,000 2, 100,000 Prepaid expenses 250,000 190,000 Total current assets 7,270,000 5,480,000 Plant and equipment, n 9,440,000 9,010,000 Total assets $16,710,000 $14,490,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,600,000 $ 2,900,000 Note payable, 10% 3,640,000 3,040,000 Total liabilities 7,240,000 5,940,000 olders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,970,000 ,050,000 Total stockholders' equity 9,470,000 8,550,000 Total liabilities and stockholders' equity $16,710,000 $14,490,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) 15,820,000 $ 13, 180,000 Cost of goods sold 12,656,000 9,885,000 Gross margin 3, 164,000 3,295,000 Selling and administrative expenses 1,000,000 1,588,000 Net operating income 2, 164,000 1,707,000 Interest expense 364,000 304,000 Net income before taxes 1,800,000 1,403,000 Income taxes (30%) 540,000 420,900 Net income 1,260,000 982, 100 Common dividends 340,000 491,050 Net income retained 920,000 491,050 Beginning retained earnings 1,050,000 558,950 Ending retained earnings $ 1,970,000 $ 1,050,000 To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: Current ratio 2.3 Acid-test ratio 1.2 Average collection period 40 days Average sale period 60 days Return on assets 8.8% Debt-to-equity ratio 0.67 Times interest earned ratio 5.8 Price-earnings ratio 10 Required: 1. Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.) Lydex Company Common-Size Balance Sheets This Year Last Year 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and equity % |%2. Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.) Lydex Company Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income % %
