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:
Lydex Company Comparative Balance Sheet |
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This Year | Last Year | |||
Assets | ||||
Current assets: | ||||
Cash | $ | 960,000 | $ | 1,200,000 |
Marketable securities | 0 | 300,000 | ||
Accounts receivable, net | 2,700,000 | 1,800,000 | ||
Inventory | 3,600,000 | 2,000,000 | ||
Prepaid expenses | 260,000 | 200,000 | ||
Total current assets | 7,520,000 | 5,500,000 | ||
Plant and equipment, net | 9,520,000 | 9,050,000 | ||
Total assets | $ | 17,040,000 | $ | 14,550,000 |
Liabilities and Stockholders' Equity | ||||
Liabilities: | ||||
Current liabilities | $ | 4,010,000 | $ | 2,980,000 |
Note payable, 10% | 3,660,000 | 3,060,000 | ||
Total liabilities | 7,670,000 | 6,040,000 | ||
Stockholders' equity: | ||||
Common stock, $75 par value | 7,500,000 | 7,500,000 | ||
Retained earnings | 1,870,000 | 1,010,000 | ||
Total stockholders' equity | 9,370,000 | 8,510,000 | ||
Total liabilities and stockholders' equity | $ | 17,040,000 | $ | 14,550,000 |
Lydex Company Comparative Income Statement and Reconciliation |
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This Year | Last Year | |||
Sales (all on account) | $ | 15,860,000 | $ | 13,580,000 |
Cost of goods sold | 12,688,000 | 10,185,000 | ||
Gross margin | 3,172,000 | 3,395,000 | ||
Selling and administrative expenses | 1,006,000 | 1,604,000 | ||
Net operating income | 2,166,000 | 1,791,000 | ||
Interest expense | 366,000 | 306,000 | ||
Net income before taxes | 1,800,000 | 1,485,000 | ||
Income taxes (30%) | 540,000 | 445,500 | ||
Net income | 1,260,000 | 1,039,500 | ||
Common dividends | 400,000 | 519,750 | ||
Net income retained | 860,000 | 519,750 | ||
Beginning retained earnings | 1,010,000 | 490,250 | ||
Ending retained earnings | $ | 1,870,000 | $ | 1,010,000 |
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
Current ratio | 2.4 | |
Acid-test ratio | 1.1 | |
Average collection period | 40 | days |
Average sale period | 60 | days |
Return on assets | 9.3 | % |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.9 | |
Price-earnings ratio | 10 | |
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 "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)
a. The earnings per share.
b. The dividend yield ratio.
c. The dividend payout ratio.
d. The price-earnings ratio.
e. The book value per share of common stock.
This year | Last Year | |||||
a. The earnings per share. |
Net income/Avg common stock outstanding | 1260000/100000 | 12.6 | 1039500/100000 | 10.40 | |
b. The dividend yield ratio. | Annual divided/MPS | 4/94*100 | 4.26 | 5.2/62*100 | 8.4 | % |
c. The dividend payout ratio. | Dividend paid/Net Income | 400000/1260000*100 | 31.75 | 519750/1039500*100 | 50 | % |
d. The price-earnings ratio. | MPS/EPS | 94/12.6 | 7.5 | 62/10.4 | 6.0 | |
e. The book value per share of common stock. | Equity/No. of common stock | 9370000/100000 | 93.7 | 8510000/100000 | 85.1 | |
If any doubt please comment |
You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked...
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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 980,000 $ 1,220,000 Marketable securities 0 300,000 Accounts receivable, net 2,780,000 1,880,000 Inventory 3,620,000...
Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 960,000 $ 1,200,000 Marketable securities 0 300,000 Accounts receivable, net 2,700,000 1,800,000 Inventory 3,600,000 2,000,000 Prepaid expenses 260,000 200,000 Total current assets 7,520,000 5,500,000 Plant and equipment, net 9,520,000 9,050,000 Total assets $ 17,040,000 $ 14,550,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 4,010,000 $ 2,980,000 Note payable, 10% 3,660,000 3,060,000 Total liabilities 7,670,000 6,040,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained...
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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 880,000 $ 1,120,000 Marketable securities 0 300,000 Accounts receivable, net 2,380,000 1,480,000 Inventory 3,520,000...
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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 1,000,000 $ 1,240,000 Marketable securities 0 300,000 Accounts receivable, net 2,860,000 1,960,000 Inventory 3,640,000...
ou 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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 960,000 $ 1,260,000 Marketable securities 0 300,000 Accounts receivable, net 2,700,000 1,800,000 Inventory 3,900,000...
Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 960,000 $ 1,200,000 Marketable securities 0 300,000 Accounts receivable, net 2,700,000 1,800,000 Inventory 3,600,000 2,000,000 Prepaid expenses 260,000 200,000 Total current assets 7,520,000 5,500,000 Plant and equipment, net 9,520,000 9,050,000 Total assets $ 17,040,000 $ 14,550,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 4,010,000 $ 2,980,000 Note payable, 10% 3,660,000 3,060,000 Total liabilities 7,670,000 6,040,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained...
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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 1,040,000 $ 1,280,000 Marketable securities 0 300,000 Accounts receivable, net 3,020,000 2,120,000 Inventory 3,680,000...
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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 1,000,000 $ 1,240,000 Marketable securities 0 300,000 Accounts receivable, net 2,860,000 1,960,000 Inventory 3,640,000...
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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 980,000 $ 1,220,000 Marketable securities 0 300,000 Accounts receivable, net 2,780,000 1,880,000 Inventory 3,620,000...
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 assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry: Problem 14-15 Part 1 Required: 1. You...