ou 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 companys financial statements, including comparing Lydexs performance to its major competitors. The companys financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 960,000 $ 1,200,000 Marketable securities 0 300,000 Accounts receivable, net 2,700,000 1,800,000 Inventory 3,600,000 2,000,000 Prepaid expenses 260,000 200,000 Total current assets 7,520,000 5,500,000 Plant and equipment, net 9,520,000 9,050,000 Total assets $ 17,040,000 $ 14,550,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 4,010,000 $ 2,980,000 Note payable, 10% 3,660,000 3,060,000 Total liabilities 7,670,000 6,040,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,870,000 1,010,000 Total stockholders' equity 9,370,000 8,510,000 Total liabilities and stockholders' equity $ 17,040,000 $ 14,550,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,860,000 $ 13,580,000 Cost of goods sold 12,688,000 10,185,000 Gross margin 3,172,000 3,395,000 Selling and administrative expenses 1,006,000 1,604,000 Net operating income 2,166,000 1,791,000 Interest expense 366,000 306,000 Net income before taxes 1,800,000 1,485,000 Income taxes (30%) 540,000 445,500 Net income 1,260,000 1,039,500 Common dividends 400,000 519,750 Net income retained 860,000 519,750 Beginning retained earnings 1,010,000 490,250 Ending retained earnings $ 1,870,000 $ 1,010,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry: Current ratio 2.4 Acid-test ratio 1.1 Average collection period 40 days Average sale period 60 days Return on assets 9.3 % Debt-to-equity ratio 0.7 Times interest earned ratio 5.9 Price-earnings ratio 10 Problem 14-15 Part 3 3. You decide, finally, to assess the companys 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 $1,670,000.) (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 $2,030,000.) (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 $14,610,000.) (Round your final answers to 2 decimal places.)

Working capital3,510,0002,520,000b.The current ratio1.881.85c.The acid-test ratio0.911.11d.The average collection period51.78days46.63dayse.The average sale perioddaysdaysf.The operating cycledaysdaysg.The total asset turnover