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 Year Assets Current assets: Cash $ 940,000 Marketable securities 0 Accounts receivable, net 2.620,000 Inventory 3,580,000 Prepaid expenses 250.000 $ 1,180,000 300,000 1.720,000 2,300,000 190,000 Total current assets Plant and equipment, net 7,390,000 9.480,000 5,690,000 9,030,000 Total assets $16,870,000 $14,720,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% $ 3.990,000 3,660.000 $ 2,940,000 3,060,000 Total liabilities 7,650,000 6,000,000 Stockholders' equity: Common stock, $75 par value Retained earnings 7,500,000 1720,000 7,500,000 1,220,000 Total stockholders' equity 9,220,000 8,720,000 Total liabilities and stockholders' equity $16,870,000 $14,720,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year 15,840,000 13,380,000 Sales (all on account) $ $ 12,672,000 10,035,000 Cost of goods sold Gross margin Selling and administrative expenses 3,168,000 1,602,000 3,345,000 1,596,000 Net operating income Interest expense 1,566,000 366,000 1,749,000 306,000 Net income before taxes Income taxes (30%) 1,200,000 360,000 1,443,000 432,900 Net income Common dividends 840,000 340,000 1,010,100 505,050 Net income retained Beginning retained earnings 500,000 1,220,000 505,050 214,950 Ending retained earnings $ 1,720,000 $ 1,220,000 x Required Information Ending retained earnings $ 1,720,000 $ 1,220,000 To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 2.4 1.1 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 40 days 60 days 9.1 % .69 5.7 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 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. 6. 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 company's financial leverage positive or negative? This Year Last Year . b. C. % % % d. % % % f