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 $ 1,040,000 0 3,020,000 3,680,000 270,000 8,010,000 9,680,000 $ 17,690,000 $ 1,280,000 300,000 2,120,000 2,300,000 210,000 6,210,000 9,130,000 $ 15,340,000 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: Comron Stock, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 4,090,000 3,720,000 7,810,000 S 3,140,000 3,120,000 6,260,000 7,500,000 2,380,000 9,880,000 $ 17,690,000 7,500,000 1,580,000 9,080,000 $ 15,340,000 Tydex Company Comparative Income Statement and Reconciliation This Year Sales (all on account) $ 15,940,000 Cost of goods sold 12,752,000 Groas margin 3,188,000 Selling and administrative expenses 1,216,000 Net operating income 1,972,000 Interest expense 372,000 Net income before taxes 1,600,000 Income taxes (30%) 400,000 Net income 1, 120,000 Coumon dividenda 320,000 Net income retained 800,000 Beginning retained earnings 1,580,000 Ending retained narnings $ 2,380,000 Last Year $ 14,380,000 10,785,000 3,595,000 1,636,000 1,959,000 312,000 1,647,000 194,100 1, 152,900 576, 450 576, 450 1,003,550 $ 1,500,000 Check my work 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 2.3 1.2 32 days 60 days 8.6% 0.7 5.8 10 Problem 14-15 Part 3 (Algo) 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. (Round your final answers to 2 decimal places.) c. The acid-test ratio. (Round your final answers to 2 decimal places.) d. The average collection period. (The accounts recevable at the beginning of last year totaled $1,750,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $2,110,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place.) g. The total asset turnover. (The total assets at the beginning of last year totaled $13,150,000.) (Round your final answers to 2 decimal places.) This Year Last Year a. Working capital b. The current ratio The acid-test ratio d. The average collection period e. The average sale period f. The operating cycle g. The total asset turnover days days days days days days Prey 3 3 of 3 Next >
