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Required information Skip to question [ The following information applies to the questions displayed below .] You have just been hired as a financial analyst
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[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 | $ | 900,000 | $ | 1,140,000 |
Marketable securities | 0 | 300,000 | ||
Accounts receivable, net | 2,460,000 | 1,560,000 | ||
Inventory | 3,540,000 | 2,400,000 | ||
Prepaid expenses | 250,000 | 190,000 | ||
Total current assets | 7,150,000 | 5,590,000 | ||
Plant and equipment, net | 9,400,000 | 8,990,000 | ||
Total assets | $ | 16,550,000 | $ | 14,580,000 |
Liabilities and Stockholders' Equity | ||||
Liabilities: | ||||
Current liabilities | $ | 3,950,000 | $ | 2,860,000 |
Note payable, 10% | 3,620,000 | 3,020,000 | ||
Total liabilities | 7,570,000 | 5,880,000 | ||
Stockholders' equity: | ||||
Common stock, $75 par value | 7,500,000 | 7,500,000 | ||
Retained earnings | 1,480,000 | 1,200,000 | ||
Total stockholders' equity | 8,980,000 | 8,700,000 | ||
Total liabilities and stockholders' equity | $ | 16,550,000 | $ | 14,580,000 |
Lydex Company Comparative Income Statement and Reconciliation | ||||
This Year | Last Year | |||
Sales (all on account) | $ | 15,800,000 | $ | 12,980,000 |
Cost of goods sold | 12,640,000 | 9,735,000 | ||
Gross margin | 3,160,000 | 3,245,000 | ||
Selling and administrative expenses | 1,998,000 | 1,580,000 | ||
Net operating income | 1,162,000 | 1,665,000 | ||
Interest expense | 362,000 | 302,000 | ||
Net income before taxes | 800,000 | 1,363,000 | ||
Income taxes (30%) | 240,000 | 408,900 | ||
Net income | 560,000 | 954,100 | ||
Common dividends | 280,000 | 477,050 | ||
Net income retained | 280,000 | 477,050 | ||
Beginning retained earnings | 1,200,000 | 722,950 | ||
Ending retained earnings | $ | 1,480,000 | $ | 1,200,000 |
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 | 1.0 | |
Average collection period | 40 | days |
Average sale period | 60 | days |
Return on assets | 8.6 | % |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.9 | |
Price-earnings ratio | 10 | |
rev: 04_27_2020_QC_CS-209476
3. You decide, finally, to assess the companys 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 $1,610,000.) (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 $1,970,000.) (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 $13,010,000.) (Round your final answers to 2 decimal places.)
I am having trouble with Last years total asset turnover.
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