Question

pter 14 Homework Assignments - Save Last Year 2 of 3 Comparative Balance sheet This Year Assets Current assets: $ 870,000 Marketable securities Accounts receivable, net 2,340,000 Inventory 3,510,000 Prepaid expenses 240,000 Total current assets 6,960,000 Plant and equipment, net 9,340,000 Total assets $ 16,300,000 Liabilities and Stockholders Equity Liabilities: Current liabilities $ 3,920,000 Note payable, 108 3,600,000 Total liabilities 7.520.000 Stockholders' equity: Common stock, $70 par value 7,000,000 Retained earnings 1,780,000 Total stockholders' equity 8,780,000 Total liabilities and stockholders' equity $ 16,300,000 $1,110,000 300.000 1,440,000 2.100.000 180,000 5,130,000 8,960,000 $14,090,000 Cook $ 2,800,000 3,000,000 5,800,000 7,000,000 1,290,000 8,290,000 $14,090,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $15,770,000 $12,680,000 Cost of goods sold 12,616.000 9.510,000 Gross margin 3, 154,000 3,170,000 Selling and administrative expenses 1,594,000 1,568,000 Net operating income 1,560,000 1.602,000 Interest expense 360,000 300,000 Net income before taxes 1,200,000 1,302,000 Income taxes (301) 360,000 390,600 Net income 840,000 911.400 Common dividends 350.000 455.00 Net income retained 490,000 455,700 Beginning retained earnings 1,290,000 834,300 Ending retained earnings $ 1,780,000 $ 1.290,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Tines interest earned ratio Price-earnings ratio 1.0 30 days 60 days 8.38 0.7 5.9 < Prev 7 B

Answer 1

Solution for 2:

			This Year	Last Year
(i)	Total Common stock	given	7000000	7000000
(ii)	Issue cost per stock	given	70	70
(iii)	Total Common shares	(i) / (ii)	100000	100000
(iv)	Total earnings for the year	given	1780000	1290000
(v)	Total Dividend for the year	given	350000	455700
(vi)	Dividend per share (DPS)	(v) / (iii)	3.5	4.557
(vii)	Market Price per share (MPS)	given	76	44
(viii)	Total shareholders equity	given	878000	829000
a	Earnings per share (EPS) = Total earnings / Total no of shares	(iv) / (iii)	17.80	12.90
b	Dividend yield ratio = DPS / MPS	(vi) / (vii)	4.6%	10.4%
c	Dividend payout ratio = DPS / EPS	(vi) / a	19.7%	35.3%
d	Price Earning ratio = MPS / EPS	(vii) / a	4.27	3.41
e	Book Value per share = Total shareholders equity / Total no of shares	(viii) / (iii)	8.78	8.29

Solution for 3:

			This Year	Last Year
(i)	Total Current Assets (CA)	given	6960000	5130000
(ii)	Total Current Liabilities (CL)	given	3920000	2800000
(iii)	Inventory - closing	given	3510000	2100000
(iv)	Total accounts Receivables - closing (ARC)	given	2340000	1440000
(v)	Total accounts Receivables - opening (ARO)	given	1440000	1580000
(vi)	Average accounts Receivables (AAR) = (ARC + ARO) / 2	[ (iv) + (v) ]/ 2	1890000	1510000
(vii)	Net Sales (NS)	given	15770000	12680000
(viii)	Accounts Receivable Turnover ratio (ARTR) = NS / AAR	(vii) / (vi)	8.34	8.40
(ix)	Inventory - opening	given	2100000	1940000
(x)	COGS	given	12616000	9510000
(xi)	Average Inventory (AI) = (Inventory opening + Inventory closing) / 2	[ (ix) + (iii) ]/ 2	2805000	2020000
(xii)	Inventory Turnover ratio (ITR) = COGS / AI	(x) / (xi)	4.50	4.71
(xiii)	Total Assets - Closing (TAC)	given	16300000	14090000
(xiv)	Total Assets - opening (TAO)	given	14090000	14520000
(xv)	Average Total Assets (ATA) = (TAC + TAO) / 2	[ (ix) + (iii) ]/ 2	15195000.00	14305000.00
a	Working Capital = CA - CL	(i) - (ii)	3040000	2330000
b	Current Ratio = CA / CL	(i) / (ii)	1.78	1.83
c	Acid test ratio = (CA - Inventory closing) / CL	[ (i) - (iii) ]/ (ii)	0.88	1.08
d	Average Collection period (ACP) = 365 / ARTR	365 / (viii)	43.74	43.47
e	Average sale period (ASP) = 365 / ITR	365 / (xii)	81.15	77.53
f	Operating Cycle = ACP + ASP	d + e	124.90	121.00
g	Asset Turnover Ratio = NS / ATA	(vii) / (xv)	1.04	0.89