The average collection period. (The accounts receivable at the beginning of last year totaled $1,730,000.) Note: Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.
Lydex Company’s financial statements for the last two years are as follows:
| Lydex Company | ||
| Comparative |
||
| This Year | Last Year | |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash | $ 1,020,000 | $ 1,260,000 |
| Marketable securities | 0 | 300,000 |
| 2,940,000 | 2,040,000 | |
| Inventory | 3,660,000 | 2,100,000 |
| Prepaid expenses | 270,000 | 210,000 |
| Total current assets | 7,890,000 | 5,910,000 |
| Plant and equipment, net | 9,640,000 | 9,110,000 |
| Total assets | $ 17,530,000 | $ 15,020,000 |
| Liabilities and |
||
| Liabilities: | ||
| Current liabilities | $ 4,070,000 | $ 3,100,000 |
| Note payable, 10% | 3,700,000 | 3,100,000 |
| Total liabilities | 7,770,000 | 6,200,000 |
| Stockholders' equity: | ||
| Common stock, $75 par value | 7,500,000 | 7,500,000 |
| 2,260,000 | 1,320,000 | |
| Total stockholders' equity | 9,760,000 | 8,820,000 |
| Total liabilities and stockholders' equity | $ 17,530,000 | $ 15,020,000 |
| Lydex Company | ||
| Comparative Income Statement and Reconciliation | ||
| This Year | Last Year | |
|---|---|---|
| Sales (all on account) | $ 15,920,000 | $ 14,180,000 |
| Cost of goods sold | 12,736,000 | 10,635,000 |
| Gross margin | 3,184,000 | 3,545,000 |
| Selling and administrative expenses | 1,014,000 | 1,628,000 |
| Net operating income | 2,170,000 | 1,917,000 |
| Interest expense | 370,000 | 310,000 |
| Net income before taxes | 1,800,000 | 1,607,000 |
| Income taxes (30%) | 540,000 | 482,100 |
| Net income | 1,260,000 | 1,124,900 |
| Common dividends | 320,000 | 562,450 |
| Net income retained | 940,000 | 562,450 |
| Beginning retained earnings | 1,320,000 | 757,550 |
| Ending retained earnings | $ 2,260,000 | $ 1,320,000 |
The following financial data and ratios are typical of companies in Lydex Company’s industry:
| 2.3 | ||
| Acid-test ratio | 1.1 | |
| Average collection period | 32 | days |
| Average sale period | 60 | days |
| Return on assets | 9.9% | |
| Debt-to-equity ratio | 0.7 | |
| Times interest earned ratio | 5.9 | |
| Price-earnings ratio | 10 |
3. To assess the company’s liquidity and asset management, compute the following for this year and last year:
-
The average collection period. (The accounts receivable at the beginning of last year totaled $1,730,000.)
Note: Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.
-
The average sale period. (The inventory at the beginning of last year totaled $2,090,000.)
Note: Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.
-
The operating cycle.
Note: Round your intermediate calculations and final answers to 2 decimal place.
-
The total asset turnover. (The total assets at the beginning of last year totaled $13,130,000.)
Note: Round your final answers to 2 decimal places.
Step by step
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Lydex Company’s financial statements for the last two years are as follows:
| Lydex Company | ||
| Comparative |
||
| This Year | Last Year | |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash | $ 1,020,000 | $ 1,260,000 |
| Marketable securities | 0 | 300,000 |
| 2,940,000 | 2,040,000 | |
| Inventory | 3,660,000 | 2,100,000 |
| Prepaid expenses | 270,000 | 210,000 |
| Total current assets | 7,890,000 | 5,910,000 |
| Plant and equipment, net | 9,640,000 | 9,110,000 |
| Total assets | $ 17,530,000 | $ 15,020,000 |
| Liabilities and |
||
| Liabilities: | ||
| Current liabilities | $ 4,070,000 | $ 3,100,000 |
| Note payable, 10% | 3,700,000 | 3,100,000 |
| Total liabilities | 7,770,000 | 6,200,000 |
| Stockholders' equity: | ||
| Common stock, $75 par value | 7,500,000 | 7,500,000 |
| 2,260,000 | 1,320,000 | |
| Total stockholders' equity | 9,760,000 | 8,820,000 |
| Total liabilities and stockholders' equity | $ 17,530,000 | $ 15,020,000 |
| Lydex Company | ||
| Comparative Income Statement and Reconciliation | ||
| This Year | Last Year | |
|---|---|---|
| Sales (all on account) | $ 15,920,000 | $ 14,180,000 |
| Cost of goods sold | 12,736,000 | 10,635,000 |
| Gross margin | 3,184,000 | 3,545,000 |
| Selling and administrative expenses | 1,014,000 | 1,628,000 |
| Net operating income | 2,170,000 | 1,917,000 |
| Interest expense | 370,000 | 310,000 |
| Net income before taxes | 1,800,000 | 1,607,000 |
| Income taxes (30%) | 540,000 | 482,100 |
| Net income | 1,260,000 | 1,124,900 |
| Common dividends | 320,000 | 562,450 |
| Net income retained | 940,000 | 562,450 |
| Beginning retained earnings | 1,320,000 | 757,550 |
| Ending retained earnings | $ 2,260,000 | $ 1,320,000 |
The following financial data and ratios are typical of companies in Lydex Company’s industry:
| 2.3 | ||
| Acid-test ratio | 1.1 | |
| Average collection period | 32 | days |
| Average sale period | 60 | days |
| Return on assets | 9.9% | |
| Debt-to-equity ratio | 0.7 | |
| Times interest earned ratio | 5.9 | |
| Price-earnings ratio | 10 |
3. To assess the company’s liquidity and asset management, compute the following for this year and last year:
The total asset turnover. (The total assets at the beginning of last year totaled $13,130,000.)
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