You have just been hired as a financial analyst for Lydex Company, a manufacture
ID: 2487632 • 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:
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:
3. 333. value 33.34 points 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) a. Working capital b. The current ratio. C. The acid-test ratic. d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,680,000.) e. The average sale period. (The inventory at the beginning of last year totaled $2,040,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year totaled $14,620,000.) This Year Last Year b. d. days days days day days days e.Explanation / Answer
This Year Last year Ans a 3560000 2650000 Net working capital=Current assets-Current liabilities 7580000-4020000 5650000-3000000 Ans b Current ratio=Current assets/current Liabilities 1.89 1.88 7580000/4020000 5650000/3000000 Ans c Quick Ratio=Current assets-Inventory-Prepaid Expenses/current Liabil. 0.92 1.12 (7580000-3610000-260000)/4020000 (5650000-2100000-200000)/3000000 ans d Average collection period a 52.67 46.96 Average accounts Receivable/Credit sales* 365 ((2740000+1840000)/2)/(15870000*365) ((1680000+1840000)/2)/(13680000*365) 52.67 46.95 Anse average sale period b 82.08 73.64 AVERAGE Inventory*365/Cost of Good Sold ((3610000+2100000)/2)*365/12696000 ((2040000+2100000)/2)/(10260000*365) 82.07 Ans f The operating Cycle Day sales of Inventory+Average collection period a+b 134.75 120.60 134.74 120.59 Ans g Total asset turnover 1.00 0.93 sales/Average total assets 15870000/((17120000+14710000)/2) 13680000/((14620000+14710000)/2)
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