Question

Required information [The following information applies to the questions displayed below.] 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 $ 940,000 2,620,000 3,580,000 250,000 7,390,000 9,480,000 $ 16,870,000 $ 1,180,000 300,000 1,720,000 2,300,000 190,000 5,690,000 9,030,000 $ 14,720,000 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, 10% Total liabilities Stockholders' equity: Common stock, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 3,990,000 3,660,000 7,650,000 $ 2,940,000 3,060,000 6,000,000 7,500,000 1,720,000 9,220,000 $ 16,870,000 7,500,000 1,220,000 8,720,000 $14,720,000

Answer 1

Lydex Company

		Ratio	This year	Last year
a	Earnings per share	Earnings available to equity shareholders/ weighted average equity shares	840,000/(75,00,000/75) = 840,000/100,000 = $ 8.40 per share	10,10,100/(75,00,000/75) = 10,10,100/100,000 = $ 10.10 per share
b	Dividend yield ratio	Dividend per share*/ Market price per share	3.4/90 = 3.8%	5.05/58 = 8.7%
c	Dividend payout ratio	Dividend per share*/Earnings per share	3.4/8.4 = 40.5%	5.05/10.10 = 50%
d	Price earnings ratio	Market price per share/Earnings per share	90/8.4 = 10.71 times	58/10.10 = 5.74 times
e	Book value per share of common stock	total shareholders equity/ Number of common shares	92,20,000/100,000 = $ 92.20 per share	87,20,000/100,000 = $ 87.20 per share
*	Dividend per share	Dividend/weighted average equity shares	340,000/100,000 = $ 3.40 per share	505,050/100,000 = $ 5.05 per share