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 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 Lydex Company $ 1,040,000 0 3,020,000 3,680,000 270,000 8,010,000 9,680,000 $ 17,690,000 $ 1,280,000 300,000 2,120,000 2,300,000 210,000 6,210,000 9,130,000 $ 15,340,000 $ 4,090,000 3,720,000 7,810,000 $ 3,140,000 3,120,000 6,260,000 7,500,000 2,380,000 9,880,000 7,500,000 1,580,000 9,080,000 $ 17,690,000 $ 15,340,000 Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) This Year $ 15,940,000 12,752,000 3,188,000 1,216,000 Last Year $ 14,380,000 10,785,000 3,595,000 1,636,000 1,972,000 1,959,000 372,000 312,000 1,600,000 480,000 1,647,000 494,100 Net operating income 1,972,000 Interest expense 372,000 Net income before taxes 1,600,000 1,959,000 312,000 1,647,000 Income taxes (30%) 480,000 494,100 Net income 1,120,000 1,152,900 Common dividends 320,000 576,450 Net income retained Beginning retained earnings 800,000 1,580,000 576,450 1,003,550 $ 1,580,000 Ending retained earnings $ 2,380,000 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 2.3 1.2 Average sale period Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio Required: 32 days 60 days 8.6% 0.69 5.8 10 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Present the balance sheet in common-size format. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Lydex Company Common-Size Balance Sheets This Year Last Year Present the balance sheet in common-size format. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Assets Current assets: Lydex Company Common-Size Balance Sheets 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 This Year Last Year % % % % % % Total stockholders' equity Total liabilities and equity % % < Required 1 Required 2 > Times interest earned ratio Price-earnings ratio Required: 88 5.8 10 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. Required 1 Required 2 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.) Sales Cost of goods sold Lydex Company Common-Size Income Statements Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income This Year Last Year % % % %