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 $ 1,020,000 $ 1,260,000 Marketable securities 0 300,000 Accounts receivable, net 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 Stockholders' Equity
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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 |
||||
| 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 |
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 | 1.1 | |
| 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 | |
rev: 04_27_2020_QC_CS-209476
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 $106 per share and that at the end of last year it was $74. 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.
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