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, $ 78 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Lydex Company $960,000 e 2,700,000 3,900,000 240,000 7,800,000 9,300,000 $ 17,100,000 $ 1,260,000 300,000 1,800,000 2,400,000 180,000 5,940,000 8,940,000 $ 14,880,000 $ 3,900,000 3,600,000 7,500,000 7,800,000 $ 2,760,000 3,000,000 5,760,000 7,800,000 1,320,000 9,120,000 $ 14,880,000 1,800,000 9,600,000 $ 17,100,000 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%) Net income Common dividends Net Income retained This Year $ 15,750,000 12,600,000 3,150,000 1,590,000 Last Year $ 12,480,000 9,900,000 2,580,000 1,560,000 1,560,000 1,020,000 360,000 300,000 1,200,000 720,000 360,000 216,000 840,000 504,000 360,000 252,000 480,000 252,000 1,068,000 Beginning retained earnings Ending retained earnings 1,320,000 $ 1,800,000 $ 1,320,000 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 32 NM