Problem $16-15($Algo$)$ Comprehensive Ratio Analysis $[$LO$16-2,$ LO$16-3,$ LO$16-4,$ LO$16-5,$ LO$16-6]$

Skip to question

$[$The following information applies to the questions displayed below.$]$

Lydex Company$$s financial statements for the last two years are as follows:

Lydex CompanyComparative Balance Sheet$$This YearLast YearAssets$$Current assets:$$Cash$ $970,000$$ $1,210,000$Marketable securities$0300,000$Accounts receivable, net$2,740,0001,840,000$Inventory$3,610,0002,100,000$Prepaid expenses$260,000200,000$Total current assets$7,580,0005,650,000$Plant and equipment, net$9,540,0009,060,000$Total assets$ $17,120,000$$ $14,710,000$Liabilities and Stockholders' Equity$$Liabilities:$$Current liabilities$ $4,020,000$$ $3,000,000$Note payable, $10\%3,680,0003,080,000$Total liabilities$7,700,0006,080,000$Stockholders' equity:$$Common stock, $$70$ par value$7,000,0007,000,000$Retained earnings$2,420,0001,630,000$Total stockholders' equity$9,420,0008,630,000$Total liabilities and stockholders' equity$ $17,120,000$$ $14,710,000$

Lydex CompanyComparative Income Statement and Reconciliation$$This YearLast YearSales $($all on account$)$$ $15,870,000$$ $13,680,000$Cost of goods sold$12,696,00010,260,000$Gross margin$3,174,0003,420,000$Selling and administrative expenses$1,106,0001,608,000$Net operating income$2,068,0001,812,000$Interest expense$368,000308,000$Net income before taxes$1,700,0001,504,000$Income taxes $(30\%)510,000451,200$Net income$1,190,0001,052,800$Common dividends$400,000526,400$Net income retained$790,000526,400$Beginning retained earnings$1,630,0001,103,600$Ending retained earnings$ $2,420,000$$ $1,630,000$

The following financial data and ratios are typical of companies in Lydex Company$$s industry:

Current ratio$2\mathrm{.}4$Acid$-$test ratio$1\mathrm{.}1$Average collection period$40$daysAverage sale period$60$daysReturn on assets$9\mathrm{.}4\%$Debt$-$to$-$equity ratio$0\mathrm{.}7$Times interest earned ratio$5\mathrm{.}7$Price$-$earnings ratio$10$

Problem $16-15$ Part $3($Algo$)$

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

Working capital.

The current ratio.

Note: Round your final answers to $2$ decimal places.

The acid$-$test ratio.

Note: Round your final answers to $2$ decimal places.

The average collection period. $($The accounts receivable at the beginning of last year totaled $$1,680,000.)$

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

The average sale period. $($The inventory at the beginning of last year totaled $$2,040,000.)$

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

The operating cycle.

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

The total asset turnover. $($The total assets at the beginning of last year totaled $$13,080,000.)$

Note: Round your final answers to $2$ decimal places.