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:

References

Section BreakProblem 13-15A Comprehensive Ratio Analysis [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]

1.

Required information

Part 1

You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (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.)

2.

Required information

Part 2

You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $94 per share and that at the end of last year it was $62. For both this year and last year, compute: (Round your intermediate calculations and final answers to 2 decimal places. For percentages 0.1234 should be considered as 12.34%.)

  3.

Required information

Part 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.)

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

PART 1: This year Last year a. The times interest earned ratio. 5.92 5.85 b. The debt-to-equity ratio. 0.39 0.36 c. The gross margin percentage. 20.0% 25.0% d. The return on total assets. 9.6% 10.0% e. The return on equity. 14.1% 12.6% f. Is the company’s financial positive positive leverage positive or negative PART 2: a. The earnings per share. 12.60 10.40 b. The dividend yield ratio. 4.3% 8.4% c. The dividend payout ratio. 31.7% 50.0% d. The price-earnings ratio. 7.5 6.0 e. The book value per share of common stock. 93.7 85.1 PART 3: a. Working capital. 3510000 2520000 b. The current ratio. 1.88 1.85 c. The acid-test ratio. 0.91 1.11 d. The average collection period. 51.78 46.63 e. The average sale period. 80.5 72.2 f. The operating cycle. 132.33 118.84 g. The total asset turnover. 1.00 0.98

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