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 companys financial statements, including comparing Lydexs performance to its major competitors. The companys financial statements for the last two years are as follows:

Lydex Company Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	820,000	$	1,250,000
Marketable securities		0		300,000
Accounts receivable, net		2,300,000		1,400,000
Inventory		3,500,000		2,000,000
Prepaid expenses		240,000		180,000
Total current assets		6,860,000		5,130,000
Plant and equipment, net		9,320,000		8,950,000
Total assets	$	16,180,000	$	14,080,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	3,910,000	$	2,780,000
Note payable, 10%		3,600,000		3,000,000
Total liabilities		7,510,000		5,780,000
Stockholders' equity:
Common stock, $75 par value		7,500,000		7,500,000
Retained earnings		1,170,000		800,000
Total stockholders' equity		8,670,000		8,300,000
Total liabilities and stockholders' equity	$	16,180,000	$	14,080,000

Lydex Company Comparative Income Statement and Reconciliation

This Year

Last Year

Sales (all on account)

$

15,760,000

$

12,580,000

Cost of goods sold

12,608,000

9,435,000

Gross margin

3,152,000

3,145,000

Selling and administrative expenses

1,863,429

1,564,000

Net operating income

1,288,571

1,581,000

Interest expense

360,000

300,000

Net income before taxes

928,571

1,281,000

Income taxes (30%)

278,571

384,300

Net income

650,000

896,700

Common dividends

280,000

448,350

Net income retained

370,000

448,350

Beginning retained earnings

800,000

351,650

Ending retained earnings

$

1,170,000

$

800,000

To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry:

Current ratio	2.3
Acid-test ratio	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. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.) Lydex CompanyCommon-Size Balance SheetsThis YearLast YearAssetsCurrent assets:Cash%%Marketable securitiesAccounts receivable, netInventoryPrepaid expensesTotal current assets0.00.0Plant and equipment, netTotal assets0.0%0.0%Liabilities and Stockholders' EquityLiabilities:Current liabilities%%Note payable, 10%Total liabilities0.00.0Stockholders equity:Common stock, $75 par valueRetained earningsTotal stockholders equity0.00.0Total liabilities and equity0.0%0.0%

2.	Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Lydex CompanyCommon-Size Income StatementsThis YearLast YearSales%%Cost of goods soldGross marginSelling and administrative expensesNet operating incomeInterest expenseNet income before taxesIncome taxes (30%)Net income%%