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 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $860,000 0 2,300,000 3,500,000 240,000 1100,000 300,000 1,400,000 2,000,000 180,000 Total current assets Plant and equipment, net 6,900,000 9,320,000 4,980,000 8,950,000 $16,220,000 13,930,000 Total assets Liabilities and Stockholders' Equity Liabilities: $ 3,910,000 $ 2,780,000 3,000,000 Current liabilities Note payable, 10% 3,600,000 Total liabilities 7,510,000 5,780,000 Stockholders' equity 7,500,000 650,000 Common stock, $75 par value Retained earnings 7,500,000 1,210,000 8,150,000 Total stockholders' equity 8,710,000 $16,220,000 13,930,000 Total liabilities and stockholders' equity Lydex Company Comparative Income Statement and Reconciliation This Year Last Year $15,760,000 $ 12,580,000 9,435,000 Sales (all on account) Cost of goods sold 12,608,000 3,145,000 1,564,000 3,152,000 1592,000 Gross margin Selling and administrative expenses 1,581,000 300,000 Net operating income Interest expense 1,560,000 360,000 1,200,000 360,000 Net income before taxes 1,281,000 384,300 Income taxes (30%) Net income Common dividends 840,000 280,000 896,700 448,350 Net income retained 560,000 650,000 448,350 201,650 Beginning retained earnings Ending retained earnings $ 1,210,000 $ 650,000 To begin your assigment 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 1.0 30 days 60 days 8.2 % .66 5.8 10 Required 1. You decide ist 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 intermediate calculations and final percentage answers to 1 decimal place. i.e., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final 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 $12,970,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7,701,650. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? This Year Last Year 2. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $74 per share and that at the end of last year it was $42. For both this year and last year, compute: (Round your intermediate calculations and final answers to 2 decimal places For percentages 0.1234 should be considered as 12.34%.) 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 a. b. C. d. e. 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round "days" intermediate calculations and final answers to 1 decimal place. Round all other intermediate calculations and final answers to 2 decimal places.) a. Working capital b. The current ratio c. The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,570,000.) e. The average sale period. (The inventory at the beginning of last year totaled $1,930,000.) f. The operating cycle g. The total asset turnover. (The total assets at the beginning of last year totaled $12,970,000.) This Year Last Year . days days days days days days 9 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 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $860,000 0 2,300,000 3,500,000 240,000 1100,000 300,000 1,400,000 2,000,000 180,000 Total current assets Plant and equipment, net 6,900,000 9,320,000 4,980,000 8,950,000 $16,220,000 13,930,000 Total assets Liabilities and Stockholders' Equity Liabilities: $ 3,910,000 $ 2,780,000 3,000,000 Current liabilities Note payable, 10% 3,600,000 Total liabilities 7,510,000 5,780,000 Stockholders' equity 7,500,000 650,000 Common stock, $75 par value Retained earnings 7,500,000 1,210,000 8,150,000 Total stockholders' equity 8,710,000 $16,220,000 13,930,000 Total liabilities and stockholders' equity Lydex Company Comparative Income Statement and Reconciliation This Year Last Year $15,760,000 $ 12,580,000 9,435,000 Sales (all on account) Cost of goods sold 12,608,000 3,145,000 1,564,000 3,152,000 1592,000 Gross margin Selling and administrative expenses 1,581,000 300,000 Net operating income Interest expense 1,560,000 360,000 1,200,000 360,000 Net income before taxes 1,281,000 384,300 Income taxes (30%) Net income Common dividends 840,000 280,000 896,700 448,350 Net income retained 560,000 650,000 448,350 201,650 Beginning retained earnings Ending retained earnings $ 1,210,000 $ 650,000 To begin your assigment 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 1.0 30 days 60 days 8.2 % .66 5.8 10 Required 1. You decide ist 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 intermediate calculations and final percentage answers to 1 decimal place. i.e., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final 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 $12,970,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7,701,650. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? This Year Last Year 2. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $74 per share and that at the end of last year it was $42. For both this year and last year, compute: (Round your intermediate calculations and final answers to 2 decimal places For percentages 0.1234 should be considered as 12.34%.) 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 a. b. C. d. e. 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round "days" intermediate calculations and final answers to 1 decimal place. Round all other intermediate calculations and final answers to 2 decimal places.) a. Working capital b. The current ratio c. The acid-test ratio d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,570,000.) e. The average sale period. (The inventory at the beginning of last year totaled $1,930,000.) f. The operating cycle g. The total asset turnover. (The total assets at the beginning of last year totaled $12,970,000.) This Year Last Year . days days days days days days 9