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 $ 1,020,000 2,949, 280 3,660,80 278,000 7,890,000 9,649, eee $ 17,530,000 $ 1,260,eee 300,000 2,848, eee 2,180, eee 218, eee 5,919,80 9, 110, eee $ 15,020, cee 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 4,079,80 3,788, eee 7,779, eee $ 3,100,eee 3,188, eee 6, 200, eee 7,589, eee 2,260, eee 9,760, eee $ 17,530,000 7,580, eee 1,320, eee 8,820, eee $ 15,020, eee Lydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,929, eee Cost of goods sold 12,736, eee Gross margin 3,184, eee Selling and administrative expenses 1,014,200 Net operating income 2,178, eee Interest expense 370, eee Net income before taxes 1,800, eee Income taxes (30%) 540,000 Net income 1,260, eee Common dividends 329, eee Net income retained 948, eee Beginning retained earnings 1,320, eee Ending retained earnings $ 2,260,000 Last Year $ 14,188,888 18,635, eee 3,545, 680 1,628, eee 1,917, eee 318,eee 1,607,080 482, 180 1,124,980 562,450 562,450 757, 550 $ 1,320,080 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 1.1 32 days 60 days 9.9% 0.7 5.9 18 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 $13,130,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,257,550. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? This Year Last Year 96 a. The times interest earned ratio b. The debt-to-equity ratio c. 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? % 96 96 2. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $106 per share and that at the end of last year it was $74. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other Intermediate and final answers to 2 decimal places.) a. The earnings per share. b. The dividend yield ratio. c. The dividend payout ratio. d. The price-earnings ratio. e. The book value per share of common stock. This Year Last Year % 96 a. The earnings per share b. The dividend yield ratio c. The dividend payout ratio d. The price-earnings ratio e. The book value per share of common stock 996 96