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 Assets This Year Current assets: Cash 990,000 Marketable securities Accounts receivable, net 2,820,000 Inventory 3,630,000 Prepaid expenses 260,000 Total current assets 7,700,000 Plant and equipment, net 9,580,000 Total assets $17,280,000 Liabilities and stockholders' Equity Liabilities Current liabilities $ 4,040,000 Note payable, 109 3,680,000 Total liabilities 7.720,000 Stockholders' equity 7,000,000 Common stock, $70 par value 2,560,000 Retained earnings 9,560,000 Total stockholders' equity $17,280,000 Total liabilities and stockholders' equity $ 1,230,000 300,000 1,920,000 2,300,000 200,000 5,950,000 9,080,000 $15,030,000 $ 3,040,000 3,080,000 6,120,000 7,000,000 1,910,000 0,910,000 $15,030,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,890,000 $ 13,880,000 Cost of goods sold 12,712,000 10,410,000 Gross margin 3,178,000 3, 470,000 Selling and administrative expenses 1,210,000 1.616.000 DAAR ER Next Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (308) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings $ 15,890,000 $ 13,880,000 12,712,000 10,410,000 3,178,000 3, 470,000 1,210,000 1,616,000 1,968,000 1,854,000 368,000 308,000 1,600,000 1,546,000 480,000 463,800 1,120,000 1,082,200 470,000 541,100 650,000 541,100 1,910,000 1,368,900 $ 2,560,000 $ 1,910,000 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 Average collection period Average sale period Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.4 1.1 32 days 60 days 9.68 0.7 5.9 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.) CD 8 of 8 Next