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 $ $870,000$ $ $1,110,000$

Marketable securities $0300,000$

Accounts receivable, net $2,340,0001,440,000$

Inventory $3,510,0002,100,000$

Prepaid expenses $240,000180,000$

Total current assets $6,960,0005,130,000$

Plant and equipment, net $9,340,0008,960,000$

Total assets $ $16,300,000$ $ $14,090,000$

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ $3,750,000$ $ $2,660,000$

Note payable, $10\%3,600,0003,000,000$

Total liabilities $7,350,0005,660,000$

Stockholders' equity:

Common stock, $$70$ par value $7,000,0007,000,000$

Retained earnings $1,950,0001,430,000$

Total stockholders' equity $8,950,0008,430,000$

Total liabilities and stockholders' equity $ $16,300,000$ $ $14,090,000$

Lydex Company

Comparative Income Statement and Reconciliation

This Year Last Year

Sales $($all on account$)$ $ $15,770,000$ $ $12,680,000$

Cost of goods sold $12,616,0009,510,000$

Gross margin $3,154,0003,170,000$

Selling and administrative expenses $1,551,1431,568,000$

Net operating income $1,602,8571,602,000$

Interest expense $360,000300,000$

Net income before taxes $1,242,8571,302,000$

Income taxes $(30\%)372,857390,600$

Net income $870,000911,400$

Common dividends $350,000455,700$

Net income retained $520,000455,700$

Beginning retained earnings $1,430,000974,300$

Ending retained earnings $ $1,950,000$ $ $1,430,000$

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

Current ratio $2\mathrm{.}3$

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

Average collection period $30$ days

Average sale period $60$ days

Return on assets $8\mathrm{.}3\%$

Debt$-$to$-$equity ratio $0\mathrm{.}67$

Times interest earned ratio $5\mathrm{.}9$

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.