Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% Total liabilities Stockholders' equity: Common stock, $ 78 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Lydex Company $ 960,000 $1,260,000 0 2,700,000 3,900,000 240,000 7,800,000 9,300,000 $ 17,100,000 300,000 1,800,000 2,400,000 180,000 5,940,000 8,940,000 $ 14,880,000 $ 3,900,000 3,600,000 7,500,000 7,800,000 1,800,000 $ 2,760,000 3,000,000 5,760,000 7,800,000 1,320,000 9,600,000 9,120,000 $ 17,100,000 $ 14,880,000 Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year $ 15,750,000 12,600,000 3,150,000 1,590,000 1,560,000 Last Year $ 12,480,000 9,900,000 2,580,000 1,560,000 1,020,000 360,000 300,000 1,200,000 720,000 360,000 216,000 840,000 504,000 360,000 252,000 480,000 1,320,000 252,000 1,068,000 $ 1,320,000 Current ratio Acid-test ratio Average collection period Return on assets Average sale period Debt-to-equity ratio. Times interest earned ratio $ 1,800,000 2.3 1.2 30 days 60 days 9.5% 0.65 5.7 10 Price-earnings ratio To assess the company's performance in terms of debt management and profitability, compute the following for this year and last rear: Note: 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 $12,960,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $9,048,000. 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 4.33 3.40 0.78 0.63 20.0 % 20.7 % 9.5 % 5.0 % 8.8 % 5.5 % f. Is the company's financial leverage positive or negative? Positive Positive