Problem 13-15A Comprehensive Ratio Analysis [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6] The following information applies to the questions displayed below.] 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 follovs: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net $ 1,020,000 $1,260,000 300,000 2,040,000 2,100,000 210,000 0 2,940,000 3,660,000 270,000 Prepaid expenses 7890,000 9,640,000 Total current assets Plant and equipment, net 5.910,000 9,110,000 Total assets 17,530,000 15,020,000 Liabilities and Stockholders' Equity Liabilities: 4,070,000 3,700,000 3,100,000 3,100,000 Current liabilities Note payable, 10% Total liabilities 7770.000 6,200,000 Stockholders' equity: Common stock, $75 par value Retained eanings 7,500,000 2,260,000 7,500,000 1,320,000 Total stockholders' equity 9,760,000 8,820,000 $17,530,000 $15,020,000 Total liabilities and stockholders' equity Lydex Company Comparative Income Statement and Reconciliation Last Year 14180,000 10,635,000 This Year 15,920,000 Sales (all on account) Cost of goods sold 12,736,000 Gross margin Selling and administrative expenses 3,184,000 1,014,000 3,545,000 1,628,000 1,917,000 310,000 Net operating income Interest expense 2,170,000 370,000 1,607000 482100 Net income before taxes 1,800,000 540,000 Income taxes (30%) Net income Common dividends 1,260,000 320,000 1,124,900 562,450 562,450 757,550 Net income retained Beginning retalned earnings 940,000 1,320,000 2,260,000 $ 1,320,000 Ending retained earnings To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 2.3 1.1 32 days 60 days 9.9 % .67 5.9 10 Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt to-equity ratio Times interest earned ratio Price carnings ratio Part 1 Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your intermediate calculations and final percentage answers to 1 decimal place. i.e., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equity ratio. c. The gross margin percentage d. The retum on total assets. (Total assets at the beginning of last year were $13,130,000.) e. The returm on equity. (Stockholders' equity at the beginning of last year totaled $8,257,550. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? This Year Last Year a. b. C. d. Part 2 2. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $106 per share and that at the end of last year it was $74. For both this year and last year, compute: (Round your intermediate calculations and final answers to 2 decimal places. For percentages 0.1234 should be considered as 12.34%.) a. The eamings per share. b. The dividend yield ratio. c. The dividend payout ratio. d. The price-earnings ratio. e. The book value per share of common stock. This Year Last Year a. b. d. Part 3 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round "days" intermediate calculations and final answers to 1 decimal place. Round all other intermediate calculations and final answers to 2 decimal places.) a. Working capital b. The current ratio c. The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,730,000.) e. The average sale period. (The inventory at the beginning of last year totaled $2,090,000.) f. The operating cycle g. The total asset tumover. The total assets at the beginning of last year totaled $13,130,000.) Last Year This Year b. C. d. days days days days days days 9