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: Assets Current assets: Lydex Company Comparative Balance Sheet This Year Last Year 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% $ 820,000 0 2,300,000 3,500,000 240,000 6,860,000 9,320,000 $ 16,180,000 $ 1,250,000 300,000 1,400,000 2,000,000 180,000 5,130,000 8,950,000 $ 14,080,000 Total liabilities Stockholders' equity: Common stock, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Lydex Company $ 3,910,000 3,600,000 7,510,000 7,500,000 1,170,000 8,670,000 $ 16,180,000 $ 2,780,000 3,000,000 5,780,000 7,500,000 800,000 8,300,000 $ 14,080,000 Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold This Year $ 15,760,000 12,608,000 3,152,000 1,863,429 Last Year $ 12,580,000 9,435,000 3,145,000 Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained 1,564,000 1,288,571 1,581,000 360,000 300,000 928,571 1,281,000 278,571 384,300 650,000 896,700 280,000 448,350 370,000 448,350 800,000 351,650 $ 1,170,000 $ 800,000 Beginning retained earnings Ending retained earnings 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 2.3 1.2 Average collection period 30 days Average sale period 60 days Return on assets 8.2% Debt-to-equity ratio 0.66 Times interest earned ratio 5.8 Price-earnings ratio 10 Required: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income.