Required information 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: Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Lydex Company Comparative Balance Sheet This Year Last Year $980,000 0 2,780,000 3,620,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% 260,000 7,640,000 9,560,000 $ 17,200,000 $ 1,220,000 300,000 1,880,000 2,200,000 200,000 5,800,000 9,070,000 $ 14,870,000 $ 3,020,000 3,080,000 54,030,000 3,680,000 Total liabilities 7,710,000 6,100,000 Stockholders' equity Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,990,000 1,270,000 Total stockholders' equity 9,490,000 8,770,000 Total liabilities and stockholders equity $ 17,200,000 $ 14,870,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) 515,880,000 $13,780,000 Cost of goods sold 12,704,000 Gross margin 3,176,000 10,335,000 3,445,000 Selling and administrative expenses 1,208,000 1,612,000 Net operating incone 1,968,000 Interest expense Net income before taxes 368,000 1.600,000 1,833,000 300,000 1,525,000 LVN FRA Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 108 9,560,000 9,070,000 $ 17,200,000 $ 14,870,000 $ 4,030,000 3,680,000 Total liabilities Stockholders' equity: 7,710,000 Common stock, $75 par value 7,500,000 Retained earnings 1,990,000 Total stockholders' equity 9,490,000 Total liabilities and stockholders' equity $ 17,200,000 Lydex Company $ 3,020,000 3,080,000 6,100,000 7,500,000 1,270,000 8,770,000 $ 14,870,000 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 $ 15,880,000 12,704,000 3,176,000 Last Year $ 13,780,000 10,335,000 3,445,000 1,208,000 1,612,000 1,968,000 1,833,000 368,000 308,000 1,600,000 480,000 1,525,000 457,500 1,067,500 400,000 720,000 1,270,000 533,750 533,750 736,250 $ 1,990,000 $ 1,270,000 1,120,000 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 2.4 1.1 Average collection period 32 days Average sale period 60 days Return on assets 9.59 Debt-to-equity ratio 0.7 Times interest earned ratio 5.0 Price-earnings ratio 10 Problem 14-15 Part 3 (Algo) 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. (Round your final answers to 2 decimal places.) c. The acid-test ratio. (Round your final answers to 2 decimal places.) d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,690,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $2,050,000.) (Use 365 days in a year. Round your Intermediate calculations and final answers to 2 decimal place.) f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place.) g. The total asset turnover. (The total assets at the beginning of last year totaled $13,090,000.) (Round your final answers to 2 decimal places.) a. Working capital b. The current ratio c. The acid-test ratio d. The average collection period e. The average sale period f. The operating cycle g. The total asset turnover This Year Last Year days days days days days days