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 Company Comparative Balance Sheet This YearLast YearAssets Current assets: Cash$ 970,000$ 1,210,000Marketable securities0300,000Accounts receivable, net2,740,0001,840,000Inventory3,610,0002,100,000Prepaid expenses260,000200,000Total current assets7,580,0005,650,000Plant and equipment, net9,540,0009,060,000Total assets$ 17,120,000$ 14,710,000Liabilities and Stockholders' Equity Liabilities: Current liabilities$ 4,020,000$ 3,000,000Note payable, 10%3,680,0003,080,000Total liabilities7,700,0006,080,000Stockholders' equity: Common stock, $70 par value7,000,0007,000,000Retained earnings2,420,0001,630,000Total stockholders' equity9,420,0008,630,000Total liabilities and stockholders' equity$ 17,120,000$ 14,710,000

Lydex Company Comparative Income Statement and Reconciliation This YearLast YearSales (all on account)$ 15,870,000$ 13,680,000Cost of goods sold12,696,00010,260,000Gross margin3,174,0003,420,000Selling and administrative expenses1,106,0001,608,000Net operating income2,068,0001,812,000Interest expense368,000308,000Net income before taxes1,700,0001,504,000Income taxes (30%)510,000451,200Net income1,190,0001,052,800Common dividends400,000526,400Net income retained790,000526,400Beginning retained earnings1,630,0001,103,600Ending retained earnings$ 2,420,000$ 1,630,000

To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry:

Current ratio2.4 Acid-test ratio1.2 Average collection period40daysAverage sale period60daysReturn on assets9.4% Debt-to-equity ratio0.67 Times interest earned ratio5.7 Price-earnings ratio10

Required:

1. Present the balance sheet in common-size format.

2. Present the income statement in common-size format down through net income.

Lydex CompanyCommon-Size Balance Sheets This YearLast YearAssets Current assets: Cash % %Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets % %Liabilities and Stockholders' Equity Liabilities: Current liabilities % %Note payable, 10% Total liabilities Stockholders equity: Common stock, $70 par value Retained earnings Total stockholders equity Total liabilities and equity %