s-Financial Statement Analysis 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 aske- you to perform a comprehensive analysis of the company's financial statements, including comparing Lydex's performane 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: 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, 10x $ 1,010,000 $1,250,000 e 2,900,000 3,650,000 270,000 7,830,000 9,620,000 $ 17,450,000 300,000 2,000,000 2,000,000 210,000 5,760,000 9,100,000 $ 14,860,000 3,100,000 Total liabilities Stockholders equity: Common stock, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Lydex Company Sales (all on account) Cost of goods sold Gross margin $4,060,000 3,700,000 $ 3,080,000 7,760,000 6,180,000 7,000,000 7,000,000 2,690,000 1,600,000 9,690,000 ,680,000 $ 17,450,000 $14,860,000 Comparative Income Statement and Reconciliation Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (35) Net Incone Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year $ 15,910,000 12,728,000 3,182,000 912,000 2,270,000 370,000 1,900,000 570,000 1,130,000 120,000 1,010,000 Last year $14,000,000 10,500,000 1,520, 1,624,000 3,96,000 310,000 1,586,000 475.000 1,110,200 $55,100 555.100 1,030,000 $3,000,000 1,124, 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 Pre Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 370,000 1,900,000 570,000 1,330,000 320,000 1,010,000 1,660,000 $ 2,690,000 318,000 1,586,000 475,800 1,110,200 555,100 555,100 1,124,900 $ 1,680,000 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 collection period Average sale period 2,31 1.1 32 days 60 days 9.8% 8.7 Times interest earned ratio 5.8 Return on assets Debt-to-equity ratio Price-earnings ratio 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 $13,120,000.) e. The return on equity (Stockholders' equity at the beginning of last year totaled $8,124,900. 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 Emes interest earned ratio b. The debt-to-equity ratio e. 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? This Year Last Year