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 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 $ 960,000 0 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 7,670,000 $ 2,980,000 3,060,000 6,040,000 7,500,000 1,010,000 7,500,000 1,870,000 Total stockholders' equity Total liabilities and stockholders' equity Lydex Company 9,370,000 8,510,000 $ 17,040,000 $ 14,550,000 Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold This Year $ 15,860,000 12,688,000 3,172,000 1,006,000 Last Year $ 13,580,000 10,185,000 3,395,000 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 2,166,000 366,000 1,800,000 540,000 1,260,000 400,000 860,000 1,010,000 1,604,000 1,791,000 306,000 1,485,000 445,500 1,039,500 519,750 519,750 490,250 Beginning retained earnings 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 Company's industry: Current ratio Acid-test ratio 2.4 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