Question
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 | $ 870,000 | $ 1,110,000 |
Marketable securities | 0 | 300,000 |
Accounts receivable, net | 2,340,000 | 1,440,000 |
Inventory | 3,510,000 | 2,100,000 |
Prepaid expenses | 240,000 | 180,000 |
Total current assets | 6,960,000 | 5,130,000 |
Plant and equipment, net | 9,340,000 | 8,960,000 |
Total assets | $ 16,300,000 | $ 14,090,000 |
Liabilities and Stockholders' Equity | ||
Liabilities: | ||
Current liabilities | $ 3,920,000 | $ 2,800,000 |
Note payable, 10% | 3,600,000 | 3,000,000 |
Total liabilities | 7,520,000 | 5,800,000 |
Stockholders' equity: | ||
Common stock, $70 par value | 7,000,000 | 7,000,000 |
Retained earnings | 1,780,000 | 1,290,000 |
Total stockholders' equity | 8,780,000 | 8,290,000 |
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 | 12,616,000 | 9,510,000 |
Gross margin | 3,154,000 | 3,170,000 |
Selling and administrative expenses | 1,594,000 | 1,568,000 |
Net operating income | 1,560,000 | 1,602,000 |
Interest expense | 360,000 | 300,000 |
Net income before taxes | 1,200,000 | 1,302,000 |
Income taxes (30%) | 360,000 | 390,600 |
Net income | 840,000 | 911,400 |
Common dividends | 350,000 | 455,700 |
Net income retained | 490,000 | 455,700 |
Beginning retained earnings | 1,290,000 | 834,300 |
Ending retained earnings | $ 1,780,000 | $ 1,290,000 |
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry:
Current ratio | 2.3 | |
---|---|---|
Acid-test ratio | 1.0 | |
Average collection period | 30 | days |
Average sale period | 60 | days |
Return on assets | 8.3% | |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.9 | |
Price-earnings ratio | 10 |
Problem 14-15 Part 2 (Algo)
2. You decide next to assess the companys stock market performance. Assume that Lydexs stock price at the end of this year is $76 per share and that at the end of last year it was $44. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)
a. The earnings per share.
b. The dividend yield ratio.
c. The dividend payout ratio.
d. The price-earnings ratio.
e. The book value per share of common stock.
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