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 $ 950,000 0 2,660,000 3,590,000 260,000 7,460,000 9,500,000 $ 16,960,000 $ 1,190,000 300,000 1,760,000 2,400,000 200,000 5,850,000 9,040,000 $ 14,890,000 Assets Current assets: 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 $ 4,000,000 3,660,000 7,660,000 $ 2,960,000 3,060,000 6,020,000 7,000,000 2,300,000 9,300,000 $ 16,960,000 7,000,000 1,870,000 8,870,000 $ 14,890,000 Lydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,850,000 Cost of goods sold 12,680,000 Gross margin 3,170,000 Selling and administrative expenses 1,704,000 Net operating income 1,466,000 Interest expense 366,000 Net income before taxes 1,100,000 Income taxes (30%) 330,000 Net income 770,000 Common dividends 340,000 Net income retained 430,000 Beginning retained earnings 1,870,000 Ending retained earnings $ 2,300,000 Last Year $ 13,480,000 10,110,000 3,370,000 1,600,000 1,770,000 306,000 1,464,000 439 1,024,800 9,200 512,400 512,400 1,357,600 $ 1,870,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 2.4 1.1 40 days 60 days Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Times interest ned ratio Price-earnings ratio 9.2% 0.7 5.8 10 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 $1,660,000.) (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 $2,020,000.) (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 $13,060,000.) (Round your final answers to 2 decimal places.) This Year Last Year a. Working capital b. The current ratio c. The acid-test ratio d. The average collection period e. The average sale period f. The operating cycle 9. The total asset turnover days days days days days days