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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
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 $ $
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,
Total liabilities
Stockholders' equity:
Common stock, $ par value
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity $ $
Lydex Company
Comparative Income Statement and Reconciliation
This Year Last Year
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
Net income
Common dividends
Net income retained
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 Companys industry:
Current ratio
Acidtest ratio
Average collection period days
Average sale period days
Return on assets
Debttoequity ratio
Times interest earned ratio
Priceearnings ratio
You decide, finally, to assess the companys liquidity and asset management. For both this year and last year, compute:
a Working capital.
b The current ratio. Round your final answers to decimal places.
c The acidtest ratio. Round your final answers to decimal places.
d The average collection period. The accounts receivable at the beginning of last year totaled $Use days in a year. Round your intermediate calculations and final answers to decimal place.
e The average sale period. The inventory at the beginning of last year totaled $Use days in a year. Round your intermediate calculations and final answers to decimal place.
f The operating cycle. Round your intermediate calculations and final answers to decimal place.
g The total asset turnover. The total assets at the beginning of last year totaled $Round your final answers to decimal places.
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