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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:
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 $13,010,000.)
e. The return on equity. (Stockholders’ equity at the beginning
of last year totaled $8,222,950. There has been no change in common
stock over the last two years.)
f. Is the company’s financial leverage positive or negative?
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