You have j ust 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 companys financial statements, including comparing Lydexs performance to its major competitors. The companys financial statements for the last two years are as follows:

Comparative Balance Sheet

	This Year	Last Year
Assets
Current assets:
Cash	$930,000	1,170,000
Marketable securities	0	300,000
Account receivable, net	2,580,000	1,680,000
Inventory	3,570,000	2,200,000
Prepaid expenses	250,000	190,000
Total current assets	7,330,000	5,540,000
Plant and equipment, net	9,460,000	9,020,000
Total assets	16,790,000	14,560,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	3,980,000	2,920,000
Note payable, 10%	3,640,000	3,040,000
Total liabilities	7,620,000	5,960,000
Stockholders' equity:
Common stock, $70 par value	7,000,000	7,000,000
Retained earnings	2,170,000	1,600,000
Total stockhodlers' equity	9,170,000	8,600,000
Total liabilities and stockholders' equity	16,790,000	14,560,000

Comparative Income Statement and Reconciliation

	This Year	Last Year
Sales (all on account)	$15,830,000	13,280,000
Cost of goods sold	12,664,000	9,960,000
Gross margin	3,166,000	3,320,000
Selling and administrative expenses	1,402,000	1,592,000
Net operating income	1,764,000	1,728,000
Interest expense	364,000	304,000
Net income before taxes	1,400,000	1,424,000
Income taxes (30%)	420,000	427,200
Net income	980,000	996,800
Common dividends	410,000	498,400
Net income retained	570,000	498,400
Beginning retained earnings	1,600,000	1,101,600
Ending retained earnings	2,170,000	1,600,000

To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry:

current ratio	2.3
acid-test ratio	1.2
average collection period	40 days
average sale period	60 days
return on assets	8.9%
debt-to-equity ratio	0.68
times interest earned ratio	5.9
price-earnings ratio	10

Required:

1.

Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i.e., 0.123 is considered as 12.3.) Due to rounding, figures may not fully reconcile down a column.)

Common-Size Balance Sheets

	This year	Last year
Assets
Cash	%	%
Marketable securities
Account 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
Stockhodlers' equity:
Common stock, $70 par value
Retained earnings
Total Stockholders' equity
Total liabilities and equity	%	%

2.

Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

	This year	Last year
Sales	%	%
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Interest expense
Net income before tazes
Income taxes (30%)
Net Income	%	%