Please answer A,B,C
Please answer A,B,C
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:
| Lydex Company Comparative |
||
| This Year | Last Year | |
|---|---|---|
| Assets | ||
| Current assets: | ||
| Cash | $ 860,000 | $ 1,100,000 |
| Marketable securities | 0 | 300,000 |
| 2,300,000 | 1,400,000 | |
| Inventory | 3,500,000 | 2,000,000 |
| Prepaid expenses | 240,000 | 180,000 |
| Total current assets | 6,900,000 | 4,980,000 |
| Plant and equipment, net | 9,320,000 | 8,950,000 |
| Total assets | $ 16,220,000 | $ 13,930,000 |
| Liabilities and |
||
| Liabilities: | ||
| Current liabilities | $ 3,910,000 | $ 2,780,000 |
| Note payable, 10% | 3,600,000 | 3,000,000 |
| Total liabilities | 7,510,000 | 5,780,000 |
| Stockholders' equity: | ||
| Common stock, $75 par value | 7,500,000 | 7,500,000 |
| 1,210,000 | 650,000 | |
| Total stockholders' equity | 8,710,000 | 8,150,000 |
| Total liabilities and stockholders' equity | $ 16,220,000 | $ 13,930,000 |
| Lydex Company Comparative Income Statement and Reconciliation |
||
| This Year | Last Year | |
|---|---|---|
| Sales (all on account) | $ 15,760,000 | $ 12,580,000 |
| Cost of goods sold | 12,608,000 | 9,435,000 |
| Gross margin | 3,152,000 | 3,145,000 |
| Selling and administrative expenses | 1,592,000 | 1,564,000 |
| Net operating income | 1,560,000 | 1,581,000 |
| Interest expense | 360,000 | 300,000 |
| Net income before taxes | 1,200,000 | 1,281,000 |
| Income taxes (30%) | 360,000 | 384,300 |
| Net income | 840,000 | 896,700 |
| Common dividends | 280,000 | 448,350 |
| Net income retained | 560,000 | 448,350 |
| Beginning retained earnings | 650,000 | 201,650 |
| Ending retained earnings | $ 1,210,000 | $ 650,000 |
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
| 2.3 | ||
| Acid-test ratio | 1.0 | |
| Average collection period | 30 | days |
| Average sale period | 60 | days |
| Return on assets | 8.2% | |
| Debt-to-equity ratio | 0.7 | |
| Times interest earned ratio | 5.8 | |
| Price-earnings ratio | 10 |
Problem 14-15 Part 3 (Algo)
3. You decide, finally, to assess the company’s liquidity and asset management. For both this year and last year, compute:
a.
b. The current ratio. (Round your final answers to 2 decimal places.)
c. The acid-test ratio. (Round your final answers to 2 decimal places.)
d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,570,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.)
e. The average sale period. (The inventory at the beginning of last year totaled $1,930,000.) (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.)
f. The operating cycle. (Round your intermediate calculations and final answers to 2 decimal place.)
g. The total asset turnover. (The total assets at the beginning of last year totaled $12,970,000.) (Round your final answers to 2 decimal places.)
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