Lydex Company Comparative Balance Sheet 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 stockholders' equity Lydex Company $ 900,000 2,460,000 3,540,000 250,000 7,150,000 9,400,000 $ 16,550,000 $ 1,140,000 300,000 1,560,000 2,400,000 190,000 5,590,000 8,990,000 $ 14,580,000 $ 3,950,000 3,620,000 7,570,000 7,500,000 1,480,000 8,980,000 $ 16,550,000 $ 2,860,000 3,020,000 5,880,000 7,500,000 1,200,000 8,700,000 $ 14,580,000 Sales (all on account) Comparative Income Statement and Reconciliation This Year Cost of goods sold Gross margin Selling and administrative expenses Net operating income. Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings $ 15,800,000 12,640,000 3,160,000 1,998,000 Last Year $ 12,980,000 9,735,000 3,245,000 1,580,000 1,665,000 1,162,000 362,000 302,000 800,000 1,363,000 240,000 408,900 560,000 954,100 280,000 477,050 280,000 477,050 1,200,000 722,950 $ 1,200,000 $ 1,480,000 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 2.3 1.0 Average collection period 40 days Average sale period 60 days Return on assets 8.6% Debt-to-equity ratio 0.7 Times interest earned ratio 5.9 Price-earnings ratio 10