8 4. 3. Required Chapter 14 You decide first so assess the company's performance in terms of debt management and profability, Compute the following for both this year and last s The times interest earned ratio h. The dehe-so-equity ratio e. The gross margin percentage d. The return on total assets. (Total assets at the beginning of last year were $12,960.000.) e. The return on equity (Stockholders' equity at the beginning of last year totaled $9,048,000. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? Explain. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $72 per share and that at the end of last year it was 540. For both this year and last year, compute a. The earnings per share. b. The dividend yield ratio. e. The dividend payout ratio. d. The price-earnings ratio. How do investors regard Lydex Company as compared to other companies in the industry? Explain. e. The book value per share of common stock. Does the difference between market value per share and book value per share suggest that the stock at its current price is a bargain? Explain. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. c. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,560,000.) e. The average sale period. (The inventory at the beginning of last year totaled $1.920,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year totaled $12,960,000.) Prepare a brief memo that summarizes how Lydex is performing relative to its competitors. PROBLEM 14-16 Common-Size Financial Statements LO14-1 Refer to the financial statement data for Lydex Company given in Problem 14-15. Required: For both this year and last year: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. 3. Comment on the results of your analysis. PROBLEM 14-17 Interpretation of Financial Ratios LO14-2, LO14-3, LO14-6 Pecunious Products, Inc.'s financial results for the past three years are summarized below: Year 1 Year 3 Year 2 Sales trend 128.0 115.0 100.0 Current ratio 2.5 2.3 2.2 Acid-test ratio 0.8 0.9 1.1 Accounts receivable turnover 9.4 10.6 12.5 Inventory turnover 6.5 7.2 8.0 Dividend yield 7.1% 6.5% 5.8% Dividend payout ratio 40% 50% 60% Dividends paid per share $1.50 $1.50 $1.50 "There have been no changes in common stock outstanding over the three-year period. Your boss has asked you to review these results and then answer the following questions: a. Is it becoming easier for the company to pay its bills as they come due? b. Are customers paying their accounts at least as fast now as they were in Year 1? C. Is the total of the accounts receivable increasing, decreasing, or remaining constant? d. Is the level of inventory increasing, decreasing, or remaining constant? Re Pro