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: Assets Lydex Company Comparative Balance Sheet This Year Last Year 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 900,000 0 2,460,000 3,540,000 250,000 7,150,000 9,400,000 $ 16,550,000 $ 1,030,000 300,000 1,560,000 2,400,000 190,000 5,480,000 8,990,000 $ 14,470,000 $ 3,950,000 3,620,000 7,570,000 $ 2,860,000 3,020,000 5,880,000 7,500,000 1,090,000 7,500,000 8,590,000 1,480,000 8,980,000 $ 16,550,000 $ 14,470,000 Lydex Company Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold This Year $ 15,800,000 12,640,000 3,160,000 1,840,857 Last Year $ 12,980,000 9,735,000 3,245,000 Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 1,580,000 1,319,143 1,665,000 362,000 302,000 957,143 1,363,000 287,143 408,900 670,000 954,100 280,000 477,050 390,000 477,050 1,090,000 612,950 $ 1,090,000 $ 1,480,000 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 2.3 1.2 40 days 60 days 8.6% 0.65 5.9 Price-earnings ratio 10 Required: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. Assets Current assets: Cash Lydex Company Common-Size Balance Sheets 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and equity This Year Last Year 0.0 % % 0.0 0.0 % 0.0 % 0.0 % 0.0 % 0.0 0.0 0.0 % 0.0 % Present the income statement in common-size format down through net income. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Lydex Company Common-Size Income Statements Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income This Year Last Year % % % %