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: Cash Lydex Company Comparative Balance Sheet This Year Last Year Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, not Total assets Liabilities and Stockholders' Equity Liabilitiess Current liabilities Note payable, 10% $ 860,000 0 $1,100,000 300,000 2,300,000 1,400,000 3,500,000 240,000 2,000,000 180,000 6,900,000 4,980,000 9,320,000 8,950,000 $16,220,000 $13,930,000 $ 3,910,000 $2,700,000 3,600,000 3,000,000 Total liabilities. 7,510,000 5,780,000 Stockholders' equity Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,210,000 Total stockholders' equity 710,000 650,000 8,150,000 Total liabilities and stockholders' equity $16,220,000 $13,930,000 Lydex Company Comparative Income Statement and Reconciliation Sales (all on account) This Year 15,760,000 Last Yeas $12,500,000 Cost of goods sold 12,600.000 9,435,000 Groen sargin 3,152,000 5,145,000 Selling and administrative expenses 1,592,000 1,564,000 Set operating income 1,560,000 3,581,000 Lydex Company 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 (308) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year $ 15,760,000 12,608,000 3,152,000 1,592,000 Last Year $ 12,580,000 9,435,000 3,145,000 1,564,000 1,560,000 1,581,000 360,000 300,000 1,200,000 1,281,000 360,000 384,300 840,000 896,700 280,000 448,350 560,000 448,350 650,000 201,650 $1,210,000 $ 650,000 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 2.3 1.0 Average collection period Average sale period 30 days 60 days Return on assets 8.23 Debt-to-equity ratio 0.7 Times interest earned ratio 5.8 Price-earnings ratio: 10 13 Times interest earned ratio Price-earnings ratio 5.8 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 $12,970,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7,701,650. 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 The gross margin percentage This Year Last Year % d. The retum on total assets The retum on equity % % Is the company's financial leverage positive or negative? Times interest earned ratio Price-earnings ratio 5.8. 10 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 $74 per share and that at the end of last year it was $42. 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. a The eamings per share b. The dividend yield ratio c. The dividend payout ratio d. The price-eamings ratio e. The book value per share of common stock This Year Last Year % % % % 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 $1,570,000) (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 $1,930,000.) (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 $12,970,000.) (Round your final answers to 2 decimal places.) a. Working capital This Year Lust Year b. The current ratio c. The acid-test ratio d. The average collection period days days e. The average sale period The operating cycle g. The total asset tumover days days days days