Question
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
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 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 | $ 1,050,000 | $ 1,360,000 |
Marketable securities | 0 | 300,000 |
Accounts receivable, net | 3,060,000 | 2,160,000 |
Inventory | 3,400,000 | 2,400,000 |
Prepaid expenses | 240,000 | 220,000 |
Total current assets | 7,750,000 | 6,440,000 |
Plant and equipment, net | 9,700,000 | 9,140,000 |
Total assets | $ 17,450,000 | $ 15,580,000 |
Liabilities and Stockholders' Equity | ||
Liabilities: | ||
Current liabilities | $ 4,400,000 | $ 3,160,000 |
Note payable, 10% | 3,720,000 | 3,120,000 |
Total liabilities | 8,120,000 | 6,280,000 |
Stockholders' equity: | ||
Common stock, $70 par value | 7,000,000 | 7,000,000 |
Retained earnings | 2,330,000 | 2,300,000 |
Total stockholders' equity | 9,330,000 | 9,300,000 |
Total liabilities and stockholders' equity | $ 17,450,000 | $ 15,580,000 |
Lydex Company Comparative Income Statement and Reconciliation | ||
---|---|---|
This Year | Last Year | |
Sales (all on account) | $ 15,950,000 | $ 14,480,000 |
Cost of goods sold | 12,760,000 | 10,860,000 |
Gross margin | 3,190,000 | 3,620,000 |
Selling and administrative expenses | 2,018,000 | 1,640,000 |
Net operating income | 1,172,000 | 1,980,000 |
Interest expense | 372,000 | 312,000 |
Net income before taxes | 800,000 | 1,668,000 |
Income taxes (30%) | 240,000 | 500,400 |
Net income | 560,000 | 1,167,600 |
Common dividends | 530,000 | 583,800 |
Net income retained | 30,000 | 583,800 |
Beginning retained earnings | 2,300,000 | 1,716,200 |
Ending retained earnings | $ 2,330,000 | $ 2,300,000 |
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry:
Current ratio | 2.3 | |
---|---|---|
Acid-test ratio | 1.2 | |
Average collection period | 32 | days |
Average sale period | 60 | days |
Return on assets | 8.7% | |
Debt-to-equity ratio | 0.65 | |
Times interest earned ratio | 5.9 | |
Price-earnings ratio | 10 |
Required:
1. Present the balance sheet in common-size format.
2. Present the income statement in common-size format down through net income.
- Required 1
- Required 2
Present the balance sheet in common-size format. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.)
|
2. Required 2
Present the income statement in common-size format down through net income. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.)
|
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