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: Last Year Lydex Company Comparative Balance Sheet This Year Assets Current assets: Cash $ 1,000,000 Marketable securities Accounts receivable, net 2,860,000 Inventory 3,640,000 Prepaid expenses 270,000 $ 1,240,000 300,000 1,960,000 2,400,000 210,000 Total current assets Plant and equipment, net 7,770,000 9,600,000 6,110,000 9,090,000 Total assets $ 17,370,000 $ 15,200,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% $ 4,050,000 3,700,000 $ 3,060,000 3,100,000 Total liabilities 7750,000 6,160,000 Stockholders' equity Common stock, $75 par value Retained earnings 7,500,000 2,120,000 7,500,000 1,540,000 Total stockholders' equity 9,620,000 9,040,000 Total abilities and stockholders' equity $ 17,370,000 $15,200,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,900,000 $ 13,980,000 Cost of goods sold 12,720,000 10,485,000 Gross margin Selling and administrative expenses 3,180,000 1,410,000 3,495,000 1,620,000 Net operating income Interest expense 1,770,000 370,000 1,875,000 310,000 Net Income before taxes Income taxes (30%) 1,400,000 420,000 1,565,000 469,500 Net income Common dividends 980,000 400,000 1,095,500 547,750 Net Income retained Beginning retained earnings 580,000 1,540,000 547,750 992,250 Ending retained earnings $ 2,120,000 $ 1,540,000 To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's Industry. 2.3 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 32 days 60 days 9.7% 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 intermediate calculations and final percentage answers to 1 decimal place. I.e., 0.123 should be considered as 12.3%. Round the rest of the Intermediate calculations and final 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 $13,110,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,492,250. There has been no change in common stock over the last two years.) 1. Is the company's financial leverage positive or negative? This Year Last Year % 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 $102 per share and that at the end of last year it was $70. For both this year and last year, compute: (Round your Intermediate calculations and final answers to 2 decimal places For percentages 0.1234 should be considered as 12.34%.) a. The earnings per share. b. The dividend yield ratio. c. The dividend payout ratio. d. The price-eamings ratio. e. The book value per share of common stock. This Year Last Year 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round "days" Intermediate calculations and final answers to 1 decimal place. Round all other Intermediate calculations and final answers to 2 decimal places.) a. Working capital. b. The current ratio. c. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled $1.710,000.) e. The average sale period. (The inventory at the beginning of last year totaled $2,070,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year totaled $13,110,000.) This Year L ast Year a. b. days days days days days days