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 $ $950,000$ $ $1,110,000$

Marketable securities $0300,000$

Accounts receivable, net $2,500,0001,600,000$

Inventory $3,550,0002,000,000$

Prepaid expenses $250,000190,000$

Total current assets $7,250,0005,200,000$

Plant and equipment, net $9,420,0009,000,000$

Total assets $ $16,670,000$ $ $14,200,000$

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ $3,960,000$ $ $2,880,000$

Note payable, $10\%3,640,0003,040,000$

Total liabilities $7,600,0005,920,000$

Stockholders' equity:

Common stock, $$70$ par value $7,000,0007,000,000$

Retained earnings $2,070,0001,280,000$

Total stockholders' equity $9,070,0008,280,000$

Total liabilities and stockholders' equity $ $16,670,000$ $ $14,200,000$

Lydex Company

Comparative Income Statement and Reconciliation

This Year Last Year

Sales $($all on account$)$ $ $15,810,000$ $ $13,080,000$

Cost of goods sold $12,648,0009,810,000$

Gross margin $3,162,0003,270,000$

Selling and administrative expenses $1,183,7141,584,000$

Net operating income $1,978,2861,686,000$

Interest expense $364,000304,000$

Net income before taxes $1,614,2861,382,000$

Income taxes $(30\%)484,286414,600$

Net income $1,130,000967,400$

Common dividends $340,000483,700$

Net income retained $790,000483,700$

Beginning retained earnings $1,280,000796,300$

Ending retained earnings $ $2,070,000$ $ $1,280,000$

To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company$$s industry:

Current ratio $2\mathrm{.}3$

Acid$-$test ratio $1\mathrm{.}2$

Average collection period $40$ days

Average sale period $60$ days

Return on assets $8\mathrm{.}7\%$

Debt$-$to$-$equity ratio $0\mathrm{.}66$

Times interest earned ratio $5\mathrm{.}7$

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.