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 asseta: Cash $ 1.010,000 $1,250,000 Marketable securities 0 300.000 Accounts receivable, not 2,900,000 2,000,000 Inventory 3,650,000 2,000,000 Prepaid expenson 270,000 210,000 Total current assets 7,830,000 5,760,000 Plant and equipment, not 9.620.000 9,100,000 Total assets $17,450,000 $14,860,000 Liabilities and Stockholders' Equity Ilabilities: Current liabilities $ 4,060,000 $3,000,000 Note payable, 109 3.700,000 3.100.000 Total liabilitos 7,760.000 6,100,000 stockholders' equity Common stock 970 par value 7,000,000 7,000,000 Retained earnings 2,690,000 1,580,000 Total stockholders' equity 9.590.000 3.680,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,910,000 $ 14,080,000 Cost of goods sold 12,728,000 10M560,000 Gross margin 3,182,000 3, 520,000 Selling and administrative expenses 912,000 1624.000 Net operating income 2,270,000 1,896,000 Interest expense 370,000 3100ODO Net income before taxes 1,900,000 1,586,000 Income taxes (308) 570,000 475, 800 Net income 1,330,000 1, 110,200 Common dividends 320,000 555) 200 Net income retained 1,010,000 555, 100 Beginning retained carnings 1,680,000 1,124,900 Ending retained earnings $ 2,690,000 $ 1,680,000 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 Average collection period Average sale period Return on asets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.3 1.1 32 days 60 days 9.B 0.7 5.8 10 d. The return on total assets. (Total assets at the beginning of last year were $13,120,000.) e. The return on equity (Stockholders' equity at the beginning of last year totaled $8,124,900. There has been no change in common stock over the last two years.) f. is the company's financial leverage positive or negative? This Year Last Year