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 $ 970,000 2,740,000 3,610,000 260,000 7,580,000 9,540,000 $ 17,120,000 $1,210,000 300,000 1,840,000 2,100,000 200,000 5,650,000 9,060,000 $14,710,000 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, 10% Total liabilities Stockholders' equity: Common stock, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 4,020,000 3,680,000 7,700,000 $3,000,000 3,080,000 6,080,000 7,000,000 2,420,000 9,420,000 $ 17,120,000 7,000,000 1,630,000 8,630,000 $14,710,000 ,000 Lydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,870,000 Cost of goods sold 12,696,000 Gross margin 3, 174,000 Selling and administrative expenses 1,106,000 Net operating income 2,068,000 Interest expense 368,000 Net income before taxes 1,700,000 Income taxes (30%) 510,000 Net income 1,190,000 Common dividends 400,000 Net income retained 790,000 Beginning retained earnings 1,630,000 Ending retained earnings $ 2,420,000 Last Year $ 13,680,000 10,260,000 3,420,000 1,608,000 1,812,000 308,000 1,504,000 451,200 1,052,800 526,400 526,400 1,103,600 $ 1,630,000 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 assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.4 1.2 40 days 60 days 9.4% 0.67 5.7 10 Required: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Present the balance sheet in common-size format. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Lydex Company Common-Size Balance Sheets 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, 10% Total liabilities Stockholders' equity: Common stock, $70 par value Retained earnings Total stockholders' equity Total liabilities and equity Required 1 Required 2 Present the income statement in common-size format down through net income. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Last Year % Lydex Company Common-Size Income Statements This Year Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income