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: Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Lydex Company Comparative Balance Sheet This Year Last Year $880,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% Total liabilities Stockholders' equity: Common stock, $75 par value 2,380,000 3,520,000 240,000 7,020,000 9,360,000 $ 1,120,000 300,000 1,480,000 2,200,000 180,000 5,280,000 8,970,000 $ 16,380,000 $ 14,250,000 $ 3,930,000 3,620,000 7,550,000 7,500,000 Retained earnings 1,330,000 Total stockholders' equity 8,830,000 Total liabilities and stockholders' equity $ 16,380,000 Lydex Company $ 2,820,000 3,020,000 5,840,000 7,500,000 910,000 8,410,000 $ 14,250,000 Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold This Year $ 15,780,000 12,624,000 3,156,000 Last Year $ 12,780,000 9,585,000 3,195,000 Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 1,794,000 1,572,000 1,362,000 1,623,000 362,000 302,000 1,000,000 1,321,000 300,000 396,300 700,000 924,700 280,000 462,350 420,000 462,350 910,000 447,650 $ 1,330,000 $910,000 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 2.3 1.0 Average collection period 30 days Average sale period 60 days Return on assets 8.4% Debt-to-equity ratio 0.7 Times interest earned ratio Price-earnings ratio 5.7 10 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 $1,590,000.) (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 $1,950,000.) (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 $12,990,000.) (Round your final answers to 2 decimal places.) a. Working capital b. The current ratio c. The acid-test ratio This Year Last Year d. The average collection period days days e. The average sale period days days f. The operating cycle days days g. The total asset turnover