You have just been hired as a financial analyst for Lydex Company, a manufacture
ID: 2396060 • Letter: Y
Question
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
To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
Current ratio2.3 Acid-test ratio1.2 Average collection period40 days Average sale period60 days Return on assets8.8 % Debt-to-equity ratio0.67 Times interest earned ratio5.8 Price-earnings ratio10
Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)
Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)
Lydex CompanyComparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 920,000 $ 1,250,000 Marketable securities 0 300,000 Accounts receivable, net 2,540,000 1,640,000 Inventory 3,560,000 2,100,000 Prepaid expenses 250,000 190,000 Total current assets 7,270,000 5,480,000 Plant and equipment, net 9,440,000 9,010,000 Total assets $ 16,710,000 $ 14,490,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,600,000 $ 2,900,000 Note payable, 10% 3,640,000 3,040,000 Total liabilities 7,240,000 5,940,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,970,000 1,050,000 Total stockholders' equity 9,470,000 8,550,000 Total liabilities and stockholders' equity $ 16,710,000 $ 14,490,000 Lydex Company
Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,820,000 $ 13,180,000 Cost of goods sold 12,656,000 9,885,000 Gross margin 3,164,000 3,295,000 Selling and administrative expenses 1,000,000 1,588,000 Net operating income 2,164,000 1,707,000 Interest expense 364,000 304,000 Net income before taxes 1,800,000 1,403,000 Income taxes (30%) 540,000 420,900 Net income 1,260,000 982,100 Common dividends 340,000 491,050 Net income retained 920,000 491,050 Beginning retained earnings 1,050,000 558,950 Ending retained earnings $ 1,970,000 $ 1,050,000
To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
Current ratio2.3 Acid-test ratio1.2 Average collection period40 days Average sale period60 days Return on assets8.8 % Debt-to-equity ratio0.67 Times interest earned ratio5.8 Price-earnings ratio10
Required: PART1.Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)
Lydex Company Common-Size Balance Sheets This Year Last Year 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, $75 par value Retained earnings Total stockholders’ equity Total liabilities and equity PART2.Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)
Lydex Company Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net incomeExplanation / Answer
Lydex Company Common-Size Balance Sheets This Year % Last Year % Assets Current assets: Cash $920,000 5.5 1250000 8.6 Marketable securities 0 0.0 300000 2.1 Accounts receivable, net $2,540,000 15.2 1640000 11.3 Inventory 3560000 21.3 2100000 14.5 Prepaid expenses $250,000 1.5 190000 1.3 Total current assets $7,270,000 43.5 $5,480,000 37.8 Plant and equipment, net $9,440,000 56.5 $9,010,000 62.2 Total assets $16,710,000 100 $14,490,000 100 Liabilities and Stockholders' Equity Liabilities: Current liabilities 3600000 21.5 2900000 20.0 Note payable, 10% 3640000 21.8 3040000 21.0 Total liabilities 7240000 43.3 5940000 41.0 Stockholders’ equity: Common stock, $75 par value 7500000 44.9 7500000 51.8 Retained earnings 1970000 11.8 1050000 7.2 Total stockholders’ equity 9470000 56.7 8550000 59.0 Total liabilities and equity 16710000 100.0 14490000 100.0 PART2. Lydex Company Common-Size Income Statements This Year % Last Year Sales 15820000 100 13180000 100 Cost of goods sold 12656000 80 9885000 75 Gross margin 3164000 20 3295000 25 Selling and administrative expenses 1000000 6.3 1588000 12.0 Net operating income 2164000 13.7 1707000 13.0 Interest expense 364000 2.3 304000 2.3 Net income before taxes 1800000 11.4 1403000 10.6 Income taxes (30%) 540000 3.4 420900 3.2 Net income 1260000 8.0 982100 7.5 For Balance sheet take base at Total assets than calculate Line item/Total assets*100 same of liabilities &stockholder equity Retained earnings 1970000/16710000*100 11.80% For Income statemnet taxes Sales as base and than used formula line item/sales*100
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