90.2K

Verified Solution

Link Copied!

Need Answers on 1 and 2 You have j ust 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 companys financial statements, including comparing Lydexs performance to its major competitors. The companys financial statements for the last two years are as follows:

Lydex Company Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	960,000	$	1,260,000
Marketable securities		0		300,000
Accounts receivable, net		2,700,000		1,800,000
Inventory		3,900,000		2,400,000
Prepaid expenses		240,000		180,000
Total current assets		7,800,000		5,940,000
Plant and equipment, net		9,300,000		8,940,000
Total assets	$	17,100,000	$	14,880,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	3,900,000	$	2,760,000
Note payable, 10%		3,600,000		3,000,000
Total liabilities		7,500,000		5,760,000
Stockholders' equity:
Common stock, $78 par value		7,800,000		7,800,000
Retained earnings		1,800,000		1,320,000
Total stockholders' equity		9,600,000		9,120,000
Total liabilities and stockholders' equity	$	17,100,000	$	14,880,000
Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,750,000 $ 12,480,000 Cost of goods sold 12,600,000 9,900,000 Gross margin 3,150,000 2,580,000 Selling and administrative expenses 1,590,000 1,560,000 Net operating income 1,560,000 1,020,000 Interest expense 360,000 300,000 Net income before taxes 1,200,000 720,000 Income taxes (30%) 360,000 216,000 Net income 840,000 504,000 Common dividends 360,000 252,000 Net income retained 480,000 252,000 Beginning retained earnings 1,320,000 1,068,000 Ending retained earnings $ 1,800,000 $ 1,320,000 o begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Companys industry: Current ratio 2.3 Acid-test ratio 1.2 Average collection period 30 days Average sale period 60 days Return on assets 9.5 % Debt-to-equity ratio 0.65 Times interest earned ratio 5.7 Price-earnings ratio 10 Required: 1. Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i.e., 0.123 is considered as 12.3.) Due to rounding, figures may not fully reconcile down a column.) Answer is complete but not entirely correct Lydex Company Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash 5.6 % 8.5 % Marketable securities 0.0 2.0 Accounts receivable, net 15.8 12.1 Inventory 22.8 16.1 Prepaid expenses 1.4 1.2 Total current assets 45.6 39.9 Plant and equipment, net 54.4 60.1 Total assets 100.0 % 100.0 % Liabilities and Stockholders' Equity Liabilities: Current liabilities 22.8 % 18.6 % Note payable, 10% 21.1 20.2 Total liabilities 43.9 38.8 Stockholders equity: Common stock, $78 par value 45.6 52.4 Retained earnings 10.5 8.9 Total stockholders equity 56.1 61.3 Total liabilities and equity 100.0 % 100.1 %

2.	Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Answer is not complete

	Lydex Company Common-Size Income Statements This Year Last Year Sales 100.0 % 100.0 % Cost of goods sold 80.0 Gross margin 20.0 Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income % %

Answer & Explanation Solved by verified expert

See Answer