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

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, 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 "days" intermediate calculations and final answers to 1 decimal place. Round all other intermediate calculations and final answers to 2 decimal places.)

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

Analyses as follows.

Working Capital = Assets - Current Liabilities

Working Capital is better in current year.

Current Ratio = Current Assets/ Current Liabilities

Current Ratio is good in the previous year only.

Acid Test Ratio = (Current Assets - Inventory)/ Current Liabilities

Acid test ratio shows previous year is better than current year.

Average Collection Period =365/ Accounts receivable turnover ratio.

Accounts Receivable Turnover ratio = Net sales/ Average accounts Receivable

Average Accounts recceivable = (Opening Year Receivables+ Closing year Receivables)/2

Hence, Acounts Recceivable ratio.

Average Collection Period

Average Sale Period In Inventory = 365/ Inventory Turnover Ratio.

Inventory Turn over ratio = (opening Inventory + closing inventory)/2

Average Sale Period

Operaing cycle = Average Sale period + Average Collection Period

Total Asset turnover ratio = net sales / Average Assets

Average Assets = (opening assets + Closing Assets)/2

Asset Turnover ratio

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