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 Comparat ive Balance Sheet This Year Last Year Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $1,010,000 $1,250,000 300,000 2,000,000 2,000,000 210,000 5,760,000 9,100,000 $17,450,000 $14,860,000 2,900,000 3,650,000 270,000 7,830,000 9,620,000 Total current assets Plant and equipment, net Total assets Liabilities and Stockhol ders' Equity Liabilities $ 4,060,000 $ 3,080,000 3,100,000 6,180,000 Current liabilities Note payable, 10% 3,700,000 7,760,000 Total liabilities Stockhol ders' equity: Common stock, $70 par value Retained earnings 7,000,000 1,680,000 8,680,000 $ 17,450,000 $ 14,860,000 7,000,000 2,690,000 9,690,000 Total stockholders' equity Total liabilities and stockhol ders' equity Lydex Company Comparat ive Income Statement and Reconciliation Last Year This Year Sales (all on account) Cost of goods sold Gross margin Sel l ing and administrat ive expenses Net operat ing income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings $15,910,000 $ 14,080,000 10,560,000 3,520,000 1,624,000 , 896 , 000 310,000 1,586,000 475,800 1,110,200 555,100 555,100 1,124,900 $ 2,690,000 $ 1,680,000 12,728,000 3,182,000 912,000 2,270,000 370,000 , 900 , 000 570,000 1,330,000 320,000 1,010,000 1,680,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 2.3 1.1 Current rat io Acid-test rat io Average collection period Average sale per iod Return on assets Debt-to-equity ratio Times interest earned rat io Price-earnings ratio 32 days 60 days 9.8% 0.7 5.8 10 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 $13,120,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,124,900. 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 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