Question
Problem 14-15 (Algo) Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] Skip to question [The following information applies to the questions displayed below.] You have
Problem 14-15 (Algo) Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6]
Skip to question
[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 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 | $ 940,000 | $ 1,180,000 |
Marketable securities | 0 | 300,000 |
Accounts receivable, net | 2,620,000 | 1,720,000 |
Inventory | 3,580,000 | 2,300,000 |
Prepaid expenses | 250,000 | 190,000 |
Total current assets | 7,390,000 | 5,690,000 |
Plant and equipment, net | 9,480,000 | 9,030,000 |
Total assets | $ 16,870,000 | $ 14,720,000 |
Liabilities and Stockholders' Equity | ||
Liabilities: | ||
Current liabilities | $ 3,990,000 | $ 2,940,000 |
Note payable, 10% | 3,660,000 | 3,060,000 |
Total liabilities | 7,650,000 | 6,000,000 |
Stockholders' equity: | ||
Common stock, $75 par value | 7,500,000 | 7,500,000 |
Retained earnings | 1,720,000 | 1,220,000 |
Total stockholders' equity | 9,220,000 | 8,720,000 |
Total liabilities and stockholders' equity | $ 16,870,000 | $ 14,720,000 |
Lydex Company Comparative Income Statement and Reconciliation | ||
---|---|---|
This Year | Last Year | |
Sales (all on account) | $ 15,840,000 | $ 13,380,000 |
Cost of goods sold | 12,672,000 | 10,035,000 |
Gross margin | 3,168,000 | 3,345,000 |
Selling and administrative expenses | 1,602,000 | 1,596,000 |
Net operating income | 1,566,000 | 1,749,000 |
Interest expense | 366,000 | 306,000 |
Net income before taxes | 1,200,000 | 1,443,000 |
Income taxes (30%) | 360,000 | 432,900 |
Net income | 840,000 | 1,010,100 |
Common dividends | 340,000 | 505,050 |
Net income retained | 500,000 | 505,050 |
Beginning retained earnings | 1,220,000 | 714,950 |
Ending retained earnings | $ 1,720,000 | $ 1,220,000 |
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 | 9.1% | |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.7 | |
Price-earnings ratio | 10 |
Problem 14-15 Part 2 (Algo)
2. You decide next to assess the companys stock market performance. Assume that Lydexs stock price at the end of this year is $90 per share and that at the end of last year it was $58. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)
a. The earnings 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.
\begin{tabular}{|l|c|c|c|c|} \hline & \multicolumn{2}{c|}{ This Year } & \multicolumn{2}{c|}{ Last Year } \\ \hline a. The times interest earned ratio & & & \\ \hline b. The debt-to-equity ratio & & % & % \\ \hline c. The gross margin percentage & & % & % \\ \hline d. The return on total assets & & % & % \\ \hline e. The return on equity & & & \\ \hline f. Is the company's financial leverage positive or negative? & & & % \\ \hline \end{tabular}
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started