You have just been hired as a financial analyst for Lydex Company, a manufacture
ID: 2488034 • 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:
Explanation / Answer
Answer This year Last Year a Working Capital 3560000 2650000 b The Current Ratio 1.89 1.88 c The acid test Ratio 0.92 1.12 d The average collection period 53 47 days e The average sales period 82 100 days f The Operating cycle 135 147 g The Total asset turnover ratio 1.00 0.93 Notes Working Capital Current assets - Current Liabilities This year Last Year Current assets 7580000 5650000 Current Liabilities 4020000 3000000 Working Capital 3560000 2650000 Current ratio Current assets/ current liabilities Current ratio 1.89 1.88 Acid test ratio Current ratio -inventory-paid exp/ Current liab 0.92 1.12 Average Collection period 365*avg account receivable/sales revenue avg account receivable 2290000 1760000 Sales 15870000 13680000 Average Collection period 53 47 The average sales period 365*avg inventory/ costof goods sold Inventory 2855000 2825000 Cost of goods sold 12696000 10260000 The average sales period 82 100 The Operating cycle 365/cost of goods sold*agv inventory+365/credit sales*avg account receivable The Operating cycle 135 147 The Total Asset Turn over ratio Sales/avg assets Avg assets 15915000 14665000 The Total Asset Turn over ratio 1.00 0.93
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