You have just been hired as a financial analyst for Lydex Company, a manufacture

ID: 2498682 • 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 decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $78 per share and that at the end of last year it was $46. For both this year and last year, compute: (Round your intermediate calculations and final percentage answers to 1 decimal place. i.e., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final answers to 2 decimal places.)

Explanation / Answer

1) Ratios Industry for Lydex company Financial Data and ratios average this year last year Current ratio 2.3 1.79 1.87 Acid-test ratio 1 0.83 1.03 Average collection period 30 days 55 42 Average sale period 60 days 102 84 Return on assets 8.4 % 4.3 6.5 Debt-to-equity ratio 0.68 0.41 0.36 Times interest earned ratio 5.7 3.76 5.37 Price-earnings ratio 10 11.14 4.97 2) Stock Market performance Earnings per share 7.00 9.25 Dividend yield ratio % 3.6 10.1 Dividend pay out ratio % 40 50 Price Earnings ratio 11.14 4.97 Book Value 88.30 84.10

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You have just been hired as a financial analyst for Lydex Company, a manufacture

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You have just been hired as a financial analyst for Lydex Company, a manufacture

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