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

Lydex Company Comparative Balance Sheet This YearLast YearAssets Current assets: Cash$ 845,000$ 1,200,000Marketable securities0300,000Accounts receivable, net2,700,0001,800,000Inventory3,600,0002,000,000Prepaid expenses260,000200,000Total current assets7,405,0005,500,000Plant and equipment, net9,520,0009,050,000Total assets$ 16,925,000$ 14,550,000Liabilities and Stockholders' Equity Liabilities: Current liabilities$ 4,010,000$ 2,600,000Note payable, 10%3,660,0003,060,000Total liabilities7,670,0005,660,000Stockholders' equity: Common stock, $75 par value7,500,0007,500,000Retained earnings1,755,0001,390,000Total stockholders' equity9,255,0008,890,000Total liabilities and stockholders' equity$ 16,925,000$ 14,550,000

Lydex Company Comparative Income Statement and Reconciliation This YearLast YearSales (all on account)$ 15,860,000$ 13,580,000Cost of goods sold12,688,00010,185,000Gross margin3,172,0003,395,000Selling and administrative expenses1,713,1431,604,000Net operating income1,458,8571,791,000Interest expense366,000306,000Net income before taxes1,092,8571,485,000Income taxes (30%)327,857445,500Net income765,0001,039,500Common dividends400,000519,750Net income retained365,000519,750Beginning retained earnings1,390,000870,250Ending retained earnings$ 1,755,000$ 1,390,000

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

Current ratio2.4 Acid-test ratio1.2 Average collection period40daysAverage sale period60daysReturn on assets9.3% Debt-to-equity ratio0.66 Times interest earned ratio5.9 Price-earnings ratio10

Required:

1. Present the balance sheet in common-size format.

2. Present the income statement in common-size format down through net income.