Question

every question requires this year and last year

1) working capital (this and last year)

2) the current ratio

3) average collection period (use 365 days in a year) (accounts recievable at the beginning if kast year totaled 1,670,000)

4) average sale period (365 days in a year, inventory of beginning of kast year is 2,030,000)

5) operating cycle

6) total asset turnover (totaled at the beginning if last year at 14,610,000)

Lydex Company Comparative Balance Sheet This Year Last Year 960,000 2,700,000 3,600,000 260,000 7,520,000 9,520,000 $17,040,000 $ 1,200,000 300,000 1,800,000 2,000,000 200.000 5,500,000 9,050,000 $14,550,000 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 108 Total liabilities Stockholders' equity: Common stock, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 4,010,000 3,660,000 7,670,000 $ 2,980,000 3,060,000 6,040,000 7,500,000 7,500,000 1.870.000 1,010,000 9,370,000 8,510,000 $17,040,000 - $14,550,000 Lydex Company Comparative Income Statement and Reconciliation 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 (308) 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 Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.4 1.1 40 days 60 days 9.38 0.7 5.9 10

Answer 1

1) Working capital	This year	Last year
Total Current Assets (a)	$7,520,000	$5,500,000
Total Current Liabilities (b)	$4,010,000	$2,980,000
Working Capital (a - b)	$3,510,000	$2,520,000
2) Current Ratio	This year	Last year
Total Current Assets (a)	$7,520,000	$5,500,000
Total Current Liabilities (b)	$4,010,000	$2,980,000
Current Ratio (a/b)	1.88	1.85	times
3) Average collection period	This year	Last year
Average Accounts Receivable ([$2,700,000+$1,800,000]/2); ([$1,800,000+$1,670,000]/2) (b)	$2,250,000	$1,735,000
Net Credit sales (b)	$15,860,000	$13,580,000
Number of days in a year (c )	365	365
Average collection period (a/b*c) in days	52	47	Days
4) Average sales period:	This year	Last year
Average Inventory ([$3,600,000+$2,000,000]/2); ([$2,000,000+$2,030,000]/2) (a)	$2,800,000	$2,015,000
Cost of Goods Sold (b)	$12,688,000	$10,185,000
Number of Days in a year (c )	365	365
Average sales period in inventory (a / b * c)	81	72	Days
5) Operating Cycle	This year	Last year
Average collection period (as calculated above) (a)	52	47	Days
Average sales period in inventory (as calculated above) (b)	81	72	Days
Operating Cycle (a + b)	133	119	Days
6) Total assets turnover	This year	Last year
Net sales (a)	$15,860,000	$13,580,000
Average total assets ([$17,040,000 + $14,550,000]/2); ([$14,550,000 + $14,610,000]/2) (b)	$15,795,000	$14,580,000
Total assets turnover (a/b)	1.00	0.93	times

Note: If you get any query then please do comment, i will explain.