You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked

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You Have Just Been Hired As A Financial Analyst For Lydex Company A Manufacturer Of Safety Helmets Your Boss Has Asked 1 (56.17 KiB) Viewed 68 times

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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 Comparative Balance Sheet This Year Last Year Assets. Current assets: Cash $ 1,010,000 $ 1,250,000 Marketable securities 0 300,000 2,000,000 2,900,000 Accounts receivable, net Inventory 3,650,000 2,000,000 270,000 210,000 Prepaid expenses Total current assets 7,830,000 5,760,000 Plant and equipment, net 9,620,000 9,100,000 Total assets $ 17,450,000 $ 14,860,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% Total liabilities. $ 4,060,000 3,700,000 7,760,000 $ 3,080,000 3,100,000 6,180,000 Stockholders' equity: Common stock, $70 par value 7,000,000 7,000,000 Retained earnings 2,690,000 1,680,000 Total stockholders' equity 9,690,000 8,680,000 Total liabilities and stockholders' equity $ 17,450,000 $ 14,860,000
Lydex Company Comparative Income Statement and Reconciliation Sales (all on account) This Year $ 15,910,000 12,728,000 3,182,000 Last Year $ 14,080,000 10,560,000 Cost of goods sold Gross margin 3,520,000 912,000 1,624,000 Selling and administrative expenses Net operating income 2,270,000 1,896,000 Interest expense 370,000 310,000 1,900,000 1,586,000 Net income before taxes Income taxes (30%) Net income 570,000 475,800 1,330,000 1,110,200 Common dividends 320,000 555, 100 Net income retained 1,010,000 555, 100 Beginning retained earnings 1,680,000 1,124,900 Ending retained earnings. $ 2,690,000 $ 1,680,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: Current ratio 2.3 Acid-test ratio 1.1 Average collection period 32 days 60 days Average sale period Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 9.8% 0.7 5.8 10
es 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 $13,120,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,124,900. There has been no change in common stock over the last two years) t is the company's financial leverage positive or negative? This Year Last Year a. The times interest eamed ratio b. The debt-to-equity ratio c. The gross margin percentage d. The return on total assets e. The retum on equity fts the company's financial leverage positive or negative? % % %