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Required: You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (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. The return

Required: You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (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. The return

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Sales (all on account) Cost of goods sold Lydex Company Comparative Balance Sheet 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 Current ratio Acid-test ratio Average collection period Average sale period Return on assets Lydex Company Comparative Income Statement and Reconciliation This Year $ 15,760,000 12,508,000 3,152,000 1,592,00e 1,560,000 360,000 Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.3 1.0 30 days 60 days. This Year 8.2% $ 860,000 8 8.7 5.8 18 2,300,000 3,500,000 240,000 6,900,000 9,320,000 $ 16,220,000 $ 3,910,000 3,600,000 7,510,000 7,500,000 1,210,000 8,710,000 $ 16,220,000 1,200,000 360,000 840,000 280,000 560,000 650,000 $1,210,000 Last Year $1,100,000. 300,000 1,400,000 2,000,000 180,000 4,980,000 8,950,000 $ 13,930,000 $ 2,780,000 3,000,000 5,780,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 7,500,000 650,000 8,150,000 $ 13,930,000 Last Year $ 12,580,000 9,435,000 3,145,000 1,564,000 1,581,000 300,000 1,281,000 384,300 896,700 448,350 448, 358 201,650 $ 650,000
Transcribed Image Text: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: 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Sales (all on account) Cost of goods sold Lydex Company Comparative Balance Sheet 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 Current ratio Acid-test ratio Average collection period Average sale period Return on assets Lydex Company Comparative Income Statement and Reconciliation This Year $ 15,760,000 12,508,000 3,152,000 1,592,00e 1,560,000 360,000 Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.3 1.0 30 days 60 days. This Year 8.2% $ 860,000 8 8.7 5.8 18 2,300,000 3,500,000 240,000 6,900,000 9,320,000 $ 16,220,000 $ 3,910,000 3,600,000 7,510,000 7,500,000 1,210,000 8,710,000 $ 16,220,000 1,200,000 360,000 840,000 280,000 560,000 650,000 $1,210,000 Last Year $1,100,000. 300,000 1,400,000 2,000,000 180,000 4,980,000 8,950,000 $ 13,930,000 $ 2,780,000 3,000,000 5,780,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 7,500,000 650,000 8,150,000 $ 13,930,000 Last Year $ 12,580,000 9,435,000 3,145,000 1,564,000 1,581,000 300,000 1,281,000 384,300 896,700 448,350 448, 358 201,650 $ 650,000
Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (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 $12.970,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7701.650. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? 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 is the company's financial leverage positive or negative? This Year Positive Last Year psitve ***
Transcribed Image Text:Required: 1. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for both this year and last year: (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 $12.970,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $7701.650. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? 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 is the company's financial leverage positive or negative? This Year Positive Last Year psitve ***
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