Lydex Company Comparative Balance Sheet This Year Last Year $ 880,000 2,380,000 3,520,000 240,000 7,020,000 9,360,000 $ 16,380,000 $ 1,120,000 300,000 1,480,000 2,200,000 180,000 5,280,000 8,970,000 $14,250,000 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 stockholders' equity $ 3,930,000 3,620,000 7,550,000 $ 2,820,000 3,020,000 5,840,000 7,500,000 1,330,000 8,830,000 $ 16,380,000 7,500,000 910,000 8,410,000 $14,250,000 Lydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,780,000 Cost of goods sold 12,624,000 Gross margin 3,156,000 Selling and administrative expenses 1,794,000 Net operating income 1,362,000 Interest expense 362,000 Net income before taxes 1,000,000 Income taxes (30%) 300,000 Net income 700,000 Common dividends 280,000 Net income retained 420,000 Beginning retained earnings 910,000 Ending retained earnings $ 1,330,000 Last Year $ 12,780,000 9,585,000 3,195,000 1,572,000 1,623,000 302,000 1,321,000 396,300 924,700 462,350 462,350 447,650 $ 910,000 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 1.0 30 days 60 days 8.4% 0.7 5.7 10 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. (Round your final answers to 2 decimal places.) c. The acid-test ratio. (Round your final answers to 2 decimal places.) d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,590,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $1,950,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place.) g. The total asset turnover. (The total assets at the beginning of last year totaled $14,530,000.) (Round your final answers to 2 decimal places.)
