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 Balance Sheet   This Year Last Year Assets         Current assets:         Cash $ 1,010,000 $ 1,250,000 Marketable securities   0   300,000 Accounts receivable, net   2,900,000   2,000,000 Inventory   3,650,000   2,000,000 Prepaid expenses   270,000   210,000 Total current assets   7,830,000   5,760,000 Plant and equipment, net   9,620,000   9,100,000 Total assets $ 17,450,000 $ 14,860,000 Liabilities and Stockholders' Equity         Liabilities:         Current liabilities $ 4,060,000 $ 3,080,000 Note payable, 10%   3,700,000   3,100,000 Total liabilities   7,760,000   6,180,000 Stockholders' equity:         Common stock, $70 par value   7,000,000   7,000,000 Retained earnings   2,690,000   1,680,000 Total stockholders' equity   9,690,000   8,680,000 Total liabilities and stockholders' equity $ 17,450,000 $ 14,860,000     Lydex Company Comparative Income Statement and Reconciliation   This Year Last Year Sales (all on account) $ 15,910,000 $ 14,080,000 Cost of goods sold   12,728,000   10,560,000 Gross margin   3,182,000   3,520,000 Selling and administrative expenses   912,000   1,624,000 Net operating income   2,270,000   1,896,000 Interest expense   370,000   310,000 Net income before taxes   1,900,000   1,586,000 Income taxes (30%)   570,000   475,800 Net income   1,330,000   1,110,200 Common dividends   320,000   555,100 Net income retained   1,010,000   555,100 Beginning retained earnings   1,680,000   1,124,900 Ending retained earnings $ 2,690,000 $ 1,680,000     To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:         Current ratio 2.3   Acid-test ratio 1.1   Average collection period 32 days Average sale period 60 days Return on assets 9.8 % Debt-to-equity ratio 0.7   Times interest earned ratio 5.8   Price-earnings ratio 10     2. You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $104 per share and that at the end of last year it was $72. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)   a. The earnings per share. b. The dividend yield ratio. c. The dividend payout ratio. d. The price-earnings ratio. e. The book value per share of common stock.           This Year Last Year a. The earnings per share         b. The dividend yield ratio   %   % c. The dividend payout ratio   %   % d. The price-earnings ratio         e. The book value per share of common stock

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:

 

Lydex Company
Comparative Balance Sheet
  This Year Last Year
Assets        
Current assets:        
Cash $ 1,010,000 $ 1,250,000
Marketable securities   0   300,000
Accounts receivable, net   2,900,000   2,000,000
Inventory   3,650,000   2,000,000
Prepaid expenses   270,000   210,000
Total current assets   7,830,000   5,760,000
Plant and equipment, net   9,620,000   9,100,000
Total assets $ 17,450,000 $ 14,860,000
Liabilities and Stockholders' Equity        
Liabilities:        
Current liabilities $ 4,060,000 $ 3,080,000
Note payable, 10%   3,700,000   3,100,000
Total liabilities   7,760,000   6,180,000
Stockholders' equity:        
Common stock, $70 par value   7,000,000   7,000,000
Retained earnings   2,690,000   1,680,000
Total stockholders' equity   9,690,000   8,680,000
Total liabilities and stockholders' equity $ 17,450,000 $ 14,860,000
 

 

Lydex Company
Comparative Income Statement and Reconciliation
  This Year Last Year
Sales (all on account) $ 15,910,000 $ 14,080,000
Cost of goods sold   12,728,000   10,560,000
Gross margin   3,182,000   3,520,000
Selling and administrative expenses   912,000   1,624,000
Net operating income   2,270,000   1,896,000
Interest expense   370,000   310,000
Net income before taxes   1,900,000   1,586,000
Income taxes (30%)   570,000   475,800
Net income   1,330,000   1,110,200
Common dividends   320,000   555,100
Net income retained   1,010,000   555,100
Beginning retained earnings   1,680,000   1,124,900
Ending retained earnings $ 2,690,000 $ 1,680,000
 

 

To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:

 

     
Current ratio 2.3  
Acid-test ratio 1.1  
Average collection period 32 days
Average sale period 60 days
Return on assets 9.8 %
Debt-to-equity ratio 0.7  
Times interest earned ratio 5.8  
Price-earnings ratio 10  
 

2. You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $104 per share and that at the end of last year it was $72. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)

 

a. The earnings per share.

b. The dividend yield ratio.

c. The dividend payout ratio.

d. The price-earnings ratio.

e. The book value per share of common stock.

 

 
 
    This Year Last Year
a. The earnings per share        
b. The dividend yield ratio   %   %
c. The dividend payout ratio   %   %
d. The price-earnings ratio        
e. The book value per share of common stock    
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