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 960,000 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, $78 par value Retained earnings Total stockholders' equity 2,700,000 3,900,000 240,000 7,800,000 9,300,000 $ 17,100,000 1,260,000 300,000 1,800,000 2,400,000 180,000 5,940,000 8,940,000 $ 14,880,000 $ 3,900,000 3,600,000 7,500,000 $ 2,760,000 3,000,000 5,760,000 7,800,000 1,800,000 9,600,000 7,800,000 1,320,000 9,120,000 Stockholders' equity: Common stock, $78 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 7,800,000 1,800,000 9,600,000 $ 17,100,000 7,800,000 1,320,000 9,120,000 $ 14,880,000 Lydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,750,000 Cost of goods sold 12,600,000 Gross margin 3,150,000 Selling and administrative expenses 1,590,000 Net operating income 1,560,000 Interest expense 360,000 Net income before taxes 1,200,000 Income taxes (30%) 360,000 Net income 840,000 Common dividends 360,000 Net income retained 480,000 Beginning retained earnings 1,320,000 Ending retained earnings $ 1,800,000 Last Year $ 12,480,000 9,900,000 2,580,000 1,560,000 1,020,000 300,000 720,000 216,000 504,000 252,000 252,000 1,068,000 $ 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: 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 Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.3 1.2 30 days 60 days 9.5% 0.65 5.7 10 Required: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. Lydex Company Common-Size Balance Sheets 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, 10% 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, $78 par value Retained earnings Total stockholders' equity Total liabilities and equity % % Present the income statement in common-size format down through net income. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Lydex Company Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income % %
