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 | $ 1,000,000 | $ 1,240,000 |
Marketable securities | 0 | 300,000 |
Accounts receivable, net | 2,860,000 | 1,960,000 |
Inventory | 3,640,000 | 2,400,000 |
Prepaid expenses | 270,000 | 210,000 |
Total current assets | 7,770,000 | 6,110,000 |
Plant and equipment, net | 9,600,000 | 9,090,000 |
Total assets | $ 17,370,000 | $ 15,200,000 |
Liabilities and Stockholders' Equity | ||
Liabilities: | ||
Current liabilities | $ 4,050,000 | $ 3,060,000 |
Note payable, 10% | 3,700,000 | 3,100,000 |
Total liabilities | 7,750,000 | 6,160,000 |
Stockholders' equity: | ||
Common stock, $75 par value | 7,500,000 | 7,500,000 |
Retained earnings | 2,120,000 | 1,540,000 |
Total stockholders' equity | 9,620,000 | 9,040,000 |
Total liabilities and stockholders' equity | $ 17,370,000 | $ 15,200,000 |
Lydex Company Comparative Income Statement and Reconciliation | ||
This Year | Last Year | |
---|---|---|
Sales (all on account) | $ 15,900,000 | $ 13,980,000 |
Cost of goods sold | 12,720,000 | 10,485,000 |
Gross margin | 3,180,000 | 3,495,000 |
Selling and administrative expenses | 1,410,000 | 1,620,000 |
Net operating income | 1,770,000 | 1,875,000 |
Interest expense | 370,000 | 310,000 |
Net income before taxes | 1,400,000 | 1,565,000 |
Income taxes (30%) | 420,000 | 469,500 |
Net income | 980,000 | 1,095,500 |
Common dividends | 400,000 | 547,750 |
Net income retained | 580,000 | 547,750 |
Beginning retained earnings | 1,540,000 | 992,250 |
Ending retained earnings | $ 2,120,000 | $ 1,540,000 |
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 | 1.1 | |
Average collection period | 32 | days |
Average sale period | 60 | days |
Return on assets | 9.7% | |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.7 | |
Price-earnings ratio | 10 |
2. You decide next to assess the companys stock market performance. Assume that Lydexs stock price at the end of this year is $102 per share and that at the end of last year it was $70. 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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