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: Assets Current assets: Lydex Company Comparative Balance Sheet This Year Last Year 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 $910,000 2,500,000 3,550,000 250,000 7,210,000 9,420,000 $ 16,630,000 $ 3,960,000 3,640,000 7,600,000 $ 1,150,000 300,000 1,600,000 2,000,000 190,000 5,240,000 9,000,000 $14,240,000 $ 2,880,000 3,04,000 5,920,000 7,000,000 7,000,000 2,030,000 1,320,000 9,030,000 8,320,000 $ 16,630,000 $14,240,000 Lydex Company Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold This Year $ 15,810,000 12,648,000 3,162,000 1,298,000 Last Year $ 13,080,000 9,810,000 3,270,000 Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends 1,584,000 1,864,000 1,686,000 364,000 304,000 1,500,000 1,382,000 450,000 1,050,000 414,600 967,400 Net income retained Beginning retained earnings Ending retained earnings 340,000 710,000 1,320,000 $ 2,030,000 483,700 483,700 836,300 $ 1,320,000 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 sale period Return on assets Average collection period Debt-to-equity ratio Times interest earned ratio Price-earnings ratio. Required: 2.3 1.0 40 days 60 days 8.7% 0.7 5.7 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 $13,020,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7,836,300. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? a. The times interest eamed ratio b. The debt-to-equity ratio This Year Last Year 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?