Lydex Company's financial statements for the last two years are as follows: Lydex Company Comparative Balance...

  

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Lydex Company's financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet 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, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity This Year $ 1,050,000 3,060,000 3,400,000 240,000 7,750,000 9,700,000 $ 17,450,000 e $ 4,400,000 3,720,000 8,120,000 7,000,000 2,330,000 9,330,000 $ 17,450,000 Last Year $ 1,290,000 300,000 2,160,000 2,400,000 220,000 6,370,000 9,140,000 $ 15,510,000 $ 3,160,000 3,120,000 6,280,000 7,000,000 2,230,000 9,230,000 $ 15,510,000 Lydex Company Comparative Income Statement and Reconciliation. This Year $ 15,950,000 12,760,000 3,190,000 1,918,000 1,272,000 372,000 900,000 270,000 630,000 530,000 100,000 2,230,000 $ 2,330,000 Sales (all on account). Cost of goods sold 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 The following financial data and ratios are typical of companies in Lydex Company's industry: Current ratio Acid-test ratio. Average collection period Average sale period. Return on assets: Debt-to-equity ratio Times interest earned ratio Price-earnings ratio. 2.3 1.2 32 days 60 days 8.7% Last Year: $ 14,480,000 10,860,000 3,620,000 1,640,000 0.7 5.9 10 1,980,000 312,000 1,668,000 500,400 1,167,600 583,800 583,800 1,646,200 $ 2,230,000 Required: 1. To assess the company's performance in terms of debt management and profitability, compute the following for this year and last year: Note: 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 $13,160,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,646,200. There has been no change in common stock over the last two years.) 1. Is the company's financial leverage positive or negative? Lydex Company's financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet 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, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity This Year $ 1,050,000 3,060,000 3,400,000 240,000 7,750,000 9,700,000 $ 17,450,000 e $ 4,400,000 3,720,000 8,120,000 7,000,000 2,330,000 9,330,000 $ 17,450,000 Last Year $ 1,290,000 300,000 2,160,000 2,400,000 220,000 6,370,000 9,140,000 $ 15,510,000 $ 3,160,000 3,120,000 6,280,000 7,000,000 2,230,000 9,230,000 $ 15,510,000 Lydex Company Comparative Income Statement and Reconciliation. This Year $ 15,950,000 12,760,000 3,190,000 1,918,000 1,272,000 372,000 900,000 270,000 630,000 530,000 100,000 2,230,000 $ 2,330,000 Sales (all on account). Cost of goods sold 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 The following financial data and ratios are typical of companies in Lydex Company's industry: Current ratio Acid-test ratio. Average collection period Average sale period. Return on assets: Debt-to-equity ratio Times interest earned ratio Price-earnings ratio. 2.3 1.2 32 days 60 days 8.7% Last Year: $ 14,480,000 10,860,000 3,620,000 1,640,000 0.7 5.9 10 1,980,000 312,000 1,668,000 500,400 1,167,600 583,800 583,800 1,646,200 $ 2,230,000 Required: 1. To assess the company's performance in terms of debt management and profitability, compute the following for this year and last year: Note: 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 $13,160,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,646,200. There has been no change in common stock over the last two years.) 1. Is the company's financial leverage positive or negative?

Answer rating: 100% (QA)

Times interest earned ratio This can be calculated as Earnings before interest and income taxes Inte... View the full answer