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 $ $940,000$ $ $1,200,000$

Marketable securities $0300,000$

Accounts receivable, net $2,620,0001,720,000$

Inventory $3,580,0002,300,000$

Prepaid expenses $250,000190,000$

Total current assets $7,390,0005,710,000$

Plant and equipment, net $9,480,0009,030,000$

Total assets $ $16,870,000$ $ $14,740,000$

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ $3,880,000$ $ $2,940,000$

Note payable, $10\%3,660,0003,060,000$

Total liabilities $7,540,0006,000,000$

Stockholders' equity:

Common stock, $$75$ par value $7,500,0007,500,000$

Retained earnings $1,830,0001,240,000$

Total stockholders' equity $9,330,0008,740,000$

Total liabilities and stockholders' equity $ $16,870,000$ $ $14,740,000$

Lydex Company

Comparative Income Statement and Reconciliation

This Year Last Year

Sales $($all on account$)$ $ $15,840,000$ $ $13,380,000$

Cost of goods sold $12,672,00010,035,000$

Gross margin $3,168,0003,345,000$

Selling and administrative expenses $1,473,4291,596,000$

Net operating income $1,694,5711,749,000$

Interest expense $366,000306,000$

Net income before taxes $1,328,5711,443,000$

Income taxes $(30\%)398,571432,900$

Net income $930,0001,010,100$

Common dividends $340,000505,050$

Net income retained $590,000505,050$

Beginning retained earnings $1,240,000734,950$

Ending retained earnings $ $1,830,000$ $ $1,240,000$

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

Current ratio $2\mathrm{.}4$

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

Average collection period $40$ days

Average sale period $60$ days

Return on assets $9\mathrm{.}1\%$

Debt$-$to$-$equity ratio $0\mathrm{.}69$

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.