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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:
To begin your assignment you gather the following financial data
and ratios that are typical of companies in Lydex Company’s
industry:
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 $1,610,000.) (Use
365 days in a year. Round your intermediate calculations and final
answers to 2 decimal place.)
e. The average sale period. (The inventory at the beginning of
last year totaled $1,970,000.) (Use 365 days in a
year. Round your intermediate calculations and final answers to 2
decimal place.)
f. The operating cycle. (Round your intermediate
calculations and final answers to 2 decimal place.)
g. The total asset turnover. (The total assets at the beginning
of last year totaled $14,550,000.) (Round your final
answers to 2 decimal places.)