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, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 930,000 B 2,580,000 3,570,000 250,000 7,330,000 9,460,000 $ 16,790,000 $ 1,170,000 300,000 1,680,000 2,200,000 190,000 5,540,000 9,020,000 $ 14,560,000 $ 3,980,000 3,640,000 7,620,000 7,000,000 $ 2,920,000 3,040,000 5,960,000 7,000,000 2,170,000 9,170,000 $ 16,790,000 1,600,000 8,600,000 $ 14,560,000 Lydex Company Comparative Income Statement and Reconciliation Sales (all on account) 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 This Year $ 15,830,000 12,664,000 3,166,000 1,402,000 1,764,000 364,000 1,400,000 Last Year $ 13,280,000 9,960,000 3,320,000 1,592,000 1,728,000 304,000 1,424,000 420,000 427,200 980,000 996,800 410,000 498,400 570,000 1,600,000 498,400 1,101,600 $ 2,170,000 Ending retained earnings $ 1,600,000 The following financial data and ratios are typical of companies in Lydex Company's industry: Current ratio Acid-test ratio 2.3 1.1 Average collection period 40 days Average sale period 60 days Return on assets 8.9% Debt-to-equity ratio 0.7 Times interest earned ratio 5.9 Price-earnings ratio 10 Required: 1. To assess the company's performance in terms of debt management and profitability, compute the following for this year and la year: Note: Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places. 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 $13,040,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,101,600. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? a. The times interest earned ratio b. The debt-to-equity ratio This Year Last Year c. The gross margin percentage % % d. The return on total assets e. The return on equity % % % % f. Is the company's financial leverage positive or negative?