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 comprehenslve 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 recelvable, net Inventory Prepaid expenses $ 1,050,000 $ 1,290,000 300,000 2,160,000 2,400,000 220,000 0 3,060,000 3,400,000 240,000 Total current assets Plant and equipment, net 7750,000 9,700,000 6,370,000 9,140,000 Total assets $17,450,000 $15,510,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10 % $ 4,400,000 3,720,000 $ 3,160,000 3,120,000 Total liabilities 8,120,000 6,280,000 Stockholders' equity Common stock, $70 par value Retained earnings 7,000,000 2,330,000 7,000,000 2,230,000 .. Total stockholders' equity 9,330,000 9,230,000 ... ole $ 15,510,000 Total liabilities and stockholders' equity $17450,000 Lydex Company Comparative Income Statement and Reconcllation Last Year $ 14,480,000 10,860,000 This Year $15,950,000 Sales (all on account) Cost of goods sold 12,760,000 3,620,000 1,640,000 Gross margin Selling and administrative expenses 3,190,000 1,918,000 1,980,000 312,000 Net operating income Interest expense 1,272,000 372,000 ... 1,668,000 500,400 Net income before taxes Income taxes (30%) 900,000 270,000 O... rt... 1,167,600 583,800 Net income Common dividends 630,000 530,000 583,800 1,646,200 100,000 2,230,000 Net income retained Beginning retained earnings ic... $ 2,330,000 $ 2,230,000 Ending retained earnings ft... To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: t... Sta... Pe... 2.3 Current ratio Acid-test ratio nsole 1.2 32 days 60 days Average collection periad Average sale period ble 8.7 % Return on assets Debt-to-equity ratio Times Interest earned ratio .65 5.9 Price-earnings ratio 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. 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 $13,160,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,646,200. 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. % . % 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 $112 per share and that at the end of last year it was $80. For both this year and last year, compute: (Round your intermediate calcu lations 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 $1,760,000.) e. The average sale period. (The inventory at the beginning of last year totaled $2,120,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year totaled $13,160,000.) This Year Last Year . b. C. days days days days days d. e. days f. 9