Problem 14-16 (Algo) Common-Size Financial Statements [LO14-1] 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: Assets Lydex Company Comparative Balance Sheet This Year Last Year 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, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 965,000 0 2,980,000 3,670,000 270,000 7,885,000 9,660,000 $ 17,545,000 $ 1,350,000 300,000 2,080,000 2,200,000 210,000 6,140,000 9,120,000 $ 15,260,000 $ 4,080,000 3,720,000 7,800,000 7,000,000 2,745,000 9,745,000 $ 2,500,000 3,120,000 5,620,000 7,000,000 2,640,000 9,640,000 $ 15,260,000 $ 17,545,000 Lydex Company Comparative Income Statement and Reconciliation This Year 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 Beginning retained earnings Ending retained earnings $ 15,930,000 12,744,000 3,186,000 2,206,857 979,143 372,000 Last Year $ 14,280,000 10,710,000 3,570,000 1,632,000 1,938,000 312,000 607,143 1,626,000 182,143 487,800 425,000 1,138,200 320,000 569,100 105,000 2,640,000 $ 2,745,000 569,100 2,070,900 $ 2,640,000 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 Average collection period Average sale period Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio Required: 32 days 60 days 8.5% 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income.