Lydex Companys 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
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
Retained earnings	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

The following financial data and ratios are typical of companies in Lydex Companys industry:

Current ratio	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

1. To assess the companys 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 $13,130,000.)

E. The return on equity. (Stockholders equity at the beginning of last year totaled $8,257,550. There has been no change in common stock over the last two years.)

F. Is the companys financial leverage positive or negative?

2. To assess the companys stock market performance, compute the following for this year and last year. Assume Lydexs stock price at the end of this year and last year was $106 and $74, respectively.

Note: 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.

3. To assess the companys liquidity and asset management, compute the following for this year and last year:

A. Working capital.

B. The current ratio.

Note: Round your final answers to 2 decimal places.

C. The acid-test ratio.

Note: Round your final answers to 2 decimal places.

D. The average collection period. (The accounts receivable at the beginning of last year totaled $1,730,000.)

Note: Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.

E. The average sale period. (The inventory at the beginning of last year totaled $2,090,000.)

Note: Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal place.

F. The operating cycle.

Note: Round your intermediate calculations and final answers to 2 decimal place.

G. The total asset turnover. (The total assets at the beginning of last year totaled $13,130,000.)

Note: Round your final answers to 2 decimal places.

Answer rating: 100% (QA)

1 To assess the companys performance in terms of debt management and profitability A Times interest earned ratio This year Net income before taxes Interest expense 1800000 370000 486 Last year Net inc... View the full answer