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 Lydex Company Comparat ive Balance Sheet This Year Last Year Assets Current assets $860, 000 $ 1,100, 000 800, 000 1,400, 000 2, 000, 000 180, 000 4, 980, 00I0 8, 950, 000 16, 220, 000 $ 13,930, 000 Cash Marketable securities Account s rece ivab le, net Inventory 2, 300, 000 3, 500, 000 240, 000 6, 900, 000 9320, 000 Prepaid expenses Total current asset s lant and equipment, net Total assets Liabilities and Stockholders Equity Liabilities $ 3,910, 000 $ 2,780, 000 3, 000, 000 5, T80, 000 Current iabi lities 3, 600, 000 Tota iabilities Stockho lders equity 7, 510, 000 7, 500, 000 8, 710, 000 Common stock, $T5 par value Ret ai ned earn ings 7, 500, 000 660, 000 8, 150, 000 $ 13,930, 000 Total stockho lders equitsy Total iabi lities and stockholders equity 16, 220, 000 Lydex Company Comparative Income St at ement and Reconc iliation This Year ast Year Sales (alI on account) Cost of goods sold Gross margin Sel ling and adm inistrat ive expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beg inning ret ai ned earnings Ending retained earnings $ 15, T60, 000 12, 608, 000 3, 152, 000 1,592, 000 1, 560, 000 860, 000 1, 200, 000 860, 000 840, 000 230000 560, 000 660, 000 $ 12, 580, 000 9, 435, 000 3, 145, 000 300, 000 384, 300 896, T00 448, 360 448360 201, 660 650, 000 $ 1,210, 000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: Current rat io Acid-test rat io Average col lect ion period Average sale period Ret urn on assets Debt-to-equity ratio Times interest earned rat io Price-earnings ratio 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 "Percentage" answers to 1 decimal place and other 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 $12,970,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7,701,650. 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 a. The times interest earned ratio b. The debt-to-equity ratio C.The gross margin percentage d. The return on total assets e. The return on equity f. Is the company's financial leverage positive or negative? 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 $74 per share and that at the end of last year it was $42. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.) 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. 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 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.) c. The acid-test ratio. (Round your final answers to 2 decimal places.) d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,570,000.) (Use 365 days in a year Round your intermediate calculations and final answer to 2 decimal place.) e. The average sale period. (The inventory at the beginning of last year totaled $1,930,000.) (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal place.) f. The operating cycle. (Round your intermediate calculations and final answer to 2 decimal place.) g. The total asset turnover. (The total assets at the beginning of last year totaled $14,510,000.) (Round your final answers to 2 decimal places.) This Year Last Year a. Working capital b. The current ratio C. The acid-test ratio d. The average collection period e. The average sale period f. The operating cycle g. The total asset turnover days days days days days days