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 CompanyComparative Balance SheetThis YearLast YearAssetsCurrent assets:Cash$ $940,000$$ $1,180,000$Marketable securities$0300,000$Accounts receivable, net$2,620,0001,720,000$Inventory$3,580,0002,300,000$Prepaid expenses$250,000190,000$Total current assets$7,390,0005,690,000$Plant and equipment, net$9,480,0009,030,000$Total assets$ $16,870,000$$ $14,720,000$Liabilities and Stockholders' EquityLiabilities:Current liabilities$ $3,990,000$$ $2,940,000$Note payable, $10\%3,660,0003,060,000$Total liabilities$7,650,0006,000,000$Stockholders' equity:Common stock, $$75$ par value$7,500,0007,500,000$Retained earnings$1,720,0001,220,000$Total stockholders' equity$9,220,0008,720,000$Total liabilities and stockholders' equity$ $16,870,000$$ $14,720,000$Lydex CompanyComparative Income Statement and ReconciliationThis YearLast YearSales $($all on account$)$$ $15,840,000$$ $13,380,000$Cost of goods sold$12,672,00010,035,000$Gross margin$3,168,0003,345,000$Selling and administrative expenses$1,602,0001,596,000$Net operating income$1,566,0001,749,000$Interest expense$366,000306,000$Net income before taxes$1,200,0001,443,000$Income taxes $(30\%)360,000432,900$Net income$840,0001,010,100$Common dividends$340,000505,050$Net income retained$500,000505,050$Beginning retained earnings$1,220,000714,950$Ending retained earnings$ $1,720,000$$ $1,220,000$To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry:Current ratio$2\mathrm{.}4$Acid$-$test ratio$1\mathrm{.}1$Average collection period$40$daysAverage sale period$60$daysReturn on assets$9\mathrm{.}1\%$Debt$-$to$-$equity ratio$0\mathrm{.}7$Times interest earned ratio$5\mathrm{.}7$Price$-$earnings ratio$10$Required:$1.$ You decide first to assess the companys 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 $$13,050,000.)$e$.$ The return on equity. $($Stockholders equity at the beginning of last year totaled $$8,214,950.$ There has been no change in common stock over the last two years.$)$f$.$ Is the companys financial leverage positive or negative?