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: Last Year Lydex Company Comparative Balance Sheet This YAMT Assets Current assets Cash $ 900,000 Marketable securities 0 Accounts receivable, net 2, 460,000 Inventory 3,540,000 Prepaid expenses 250,000 Total current assets 7,150,000 Plant and equipment, net 9,400,000 Total assets $16,550,000 Liabilities and stockholders' Equity Liabilities: Current liabilities $ 3,950,000 Note payable, 101 3,620,000 Total liabilities 7,570,000 Stockholders' equity: Common stock, $75 par value 7,500,000 Retained earnings 1.480,000 Total stockholders equity 8,980,000 Total liabilities and stockholders' equity $16.550,000 $ 1,140,000 300,000 1,560,000 2,400,000 190.000 5,590,000 8,990.000 514,580,000 $ 2,860,000 3,020,000 5,380,000 7,500,000 1,200,000 8,700,000 $14,580,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,800,000 $12,980,000 Cost of goods sold 12,640.000 9.735,000 Gross margin 3,160,000 3,245,000 Selling and administrative expenses 1,990,000 1,580,000 Net operating income 1,162,000 1,665,000 Interest expense 362,000 302,000 Net income before taxes 800,000 1,363,000 Income taxes (308) 240,000 40B, 900 Net income 560,000 954,100 Common dividends 280,000 477,050 Net income retained 280,000 477,050 Beginning retained earnings 1,200,000 722,950 Ending retained earnings $ 1,480,000 $1,200,000 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 assote Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.3 1.0 40 days 60 days 8.65 0.7 5.9 10 Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equity ratio c. The gross margin percentage. d. The return on total assets. (Total assets at the beginning of last year were $13,010,000) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,222,950. There has been no change in common stock over the last two years.) 1. Is the company's financial leverage positive or negative? This year Last Year % % The times interest eamed ratio b. The debt-to-equity ratio c. The grous margin percentage d. The return on total assets The return on equity Is the company's financial leverage positive or negative? % % % 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. This Year Last Year The earnings per share 6. The dividend yield ratio c. The dividend payout ratio d. The price-earings ratio 6. The book value per share of common stock % % % % 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 receivable at the beginning of last year totaled $1,610,000) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.) e. The average sole period. (The inventory at the beginning of last year totaled $1.970,000) (Use 365 days in a year. Round your Intermediate calculations and final answers to 2 decimal place.) The operating cycle. (Round your Intermediate calculations and final answers to 2 decimal place.) o. The total asset turnover. (The total ossets at the beginning of last year totaled $13,010,000) (Round your final answers to 2 decimal places.) The Year Last Year Working capital b. The current ratio The acid-test ratio The average collection period The average sale period The operating cycle The total asset lumover days days days days days days