Lydex company’s financial statements for the last two years are as follows: Lydex CompanyComparative 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 CompanyComparative 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 The following financial data and ratios are typical of companies in Lydex Company’s 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 2. To assess the company’s stock market performance and last year was $72and $40, respectively. Assume Lydex’s stock price at the end of this year compute the following for this yearend last year. The earnings per share. The dividend yield ratio. The dividend payout ratio. The price-earnings ratio. The book value per share of common stock.

Lydex company’s financial statements for the last two years are as follows: Lydex CompanyComparative 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 CompanyComparative 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 The following financial data and ratios are typical of companies in Lydex Company’s 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 2. To assess the company’s stock market performance and last year was $72and $40, respectively. Assume Lydex’s stock price at the end of this year compute the following for this yearend last year. The earnings per share. The dividend yield ratio. The dividend payout ratio. The price-earnings ratio. The book value per share of common stock.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 19P

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Question

Lydex company’s financial statements for the last two years are as follows:

	This Year	Last Year
Lydex Company Comparative Balance Sheet
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

	This Year	Last Year
Lydex Company Comparative Income Statement and Reconciliation
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

The following financial data and ratios are typical of companies in Lydex Company’s 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

2. To assess the company’s stock market performance and last year was $72and $40, respectively. Assume Lydex’s stock price at the end of this year compute the following for this yearend last year.

The earnings per share.
The dividend yield ratio.
The dividend payout ratio.
The price-earnings ratio.
The book value per share of common stock.

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