Required information (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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: $ 1,000,000 $ 1,240,000 300,000 Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses 2,860,000 3,640,000 270,000 7,770,000 9,600,000 1,960,000 2,400,000 210,000 6,110,000 9,090,000 Total current assets Plant and equipment, net $17,370,000 $15,200,000 Total assets Liabilities and Stockholders' Equity Liabilities: $ 3,060,000 3,100,000 6,160,000 $ 4,050,000 3,700,000 7,750,000 Current liabilities Note payable, 10% Total liabilities Stockholders' equity: Common stock, $75 par value Retained earnings Total stockholders' equity 7,500,000 2,120,000 9,620,000 7,500,000 1,540,000 9,040,000 Total liabilities and stockholders' equity $17,370,000 $15,200,000 Lydex Company Comparative Income Statement and Reconciliation. This Year $ 15,900,000 12,720,000 3,180,000 1,410,000 Last Year $ 13,980,000 10,485,000 Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense 3,495,000 1,620,000 1,875,000 310,000 1,565,000 1,770,000 370,000 1,400,000 Net income before taxes Income taxes (30%) 469,500 1,095,500 547,750 420,000 Net income Common dividends 980,000 400,000 580,000 1,540,000 Net income retained 547,750 992,250 Beginning retained earnings $ 2,120,000 $ 1,540,000 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 2.3 Acid-test ratio 1.1 Average collection period Average sale period 32 days 60 days 9.78 Return on assets Debt-to-equity ratio 0.7 Times interest earned ratio 5.7 Price-earnings ratio 10 Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equity ratio. c. The gross margin percentage. d. The return on total assets. (Total assets at the beginning of last year were $13,110,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,492,250. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? This Year Last Year a. The times interest earned ratio b. The debt-to-equity ratio c. The gross margin percentage d. The return on total assets e. The return on equity f. Is the company's financial leverage positive or negative? 2. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $102 per share and that at the end of last year it was $70. 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. This Year Last Year 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 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 $1,710,000.) (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $2,070,000.) (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal place.) f. The operating cycle. (Round your intermediate calculations and final answer to 2 decimal place.) g. The total asset turnover. (The total assets at the beginning of last year totaled $14,650,000.) (Round your final answers to 2 decimal places.) This Year Last Year a. Working capital b. The current ratio c. The acid-test ratio days d. The average collection period days days days e. The average sale period f. The operating cycle days days g. The total asset turnover