Problem 14-15 (Algo) Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] [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 follows: Lydex Company Comparative Balance Sheet This Year. Last Year $960,000 0 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 112 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Lydex Company 2,700,000 3,600,000 260,000 7,520,000 9,520,000 $ 17,040,000 $ 1,200,000 300,000 1,800,000 2,000,000 200,000 5,500,000 9,050,000 $ 14,550,000 $ 4,010,000 3,660,000 $2,980,000 3,060,000 7,670,000 6,840,000 7,500,000 7,500,000 1,870,000 1,010,000 9,370,000 8,510,000 $ 17,040,000 $ 14,550,000 Comparative Income Statement and Reconciliation. 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 This Year $ 15,860,000 12,688,000 3,172,000 1,006,000 2,166,000 366,000 1,800,000 1,260,000 Last Year $ 13,580,000 10,185,000 3,395,000 1,604,000 1,791,000 306,000 1,485,000 540,000 445,500 1,039,500 400,000 519,750 860,000 519,750 1,010,000 490,250 1,870,000 $ 1,010,000 Beginning retained earnings Ending retained earnings 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 2.4 1.1 40 days 60 days Return on assets 9.3% Debt-to-equity ratio. 0.7 Times interest earned ratio. 5.9 Price-earnings ratio 10 3 TO DELIVE IN THE COMIDORYS CHILE HEARD OF GEL Indioutine do UFUNGUity Computer CHOWING TO MOLLE Required information a. The uninS BRUSi cone cou 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 $13,070,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7,990,250. There has been no change in common stock over the last two years) f Is the company's financial leverage positive or negative? Answer is complete but not entirely correct. This Year Last Year a. The times interest camed rabo 5.92 5.85 b. The debt-to-equity ratio c The gross margin porcentage d. The return on total assets: 0.82 0.71 20.0% 25.0% 13.7% 13.0% e. The return on equity f Is the company's financial leverage positive or negative? Positive 14.1% 12.6% Positive