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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 | $ | 970,000 | $ | 1,210,000 |
Marketable securities | 0 | 300,000 | ||
Accounts receivable, net | 2,740,000 | 1,840,000 | ||
Inventory | 3,610,000 | 2,100,000 | ||
Prepaid expenses | 260,000 | 200,000 | ||
Total current assets | 7,580,000 | 5,650,000 | ||
Plant and equipment, net | 9,540,000 | 9,060,000 | ||
Total assets | $ | 17,120,000 | $ | 14,710,000 |
Liabilities and Stockholders' Equity | ||||
Liabilities: | ||||
Current liabilities | $ | 4,020,000 | $ | 3,000,000 |
Note payable, 10% | 3,680,000 | 3,080,000 | ||
Total liabilities | 7,700,000 | 6,080,000 | ||
Stockholders' equity: | ||||
Common stock, $70 par value | 7,000,000 | 7,000,000 | ||
Retained earnings | 2,420,000 | 1,630,000 | ||
Total stockholders' equity | 9,420,000 | 8,630,000 | ||
Total liabilities and stockholders' equity | $ | 17,120,000 | $ | 14,710,000 |
Lydex Company Comparative Income Statement and Reconciliation |
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This Year | Last Year | |||
Sales (all on account) | $ | 15,870,000 | $ | 13,680,000 |
Cost of goods sold | 12,696,000 | 10,260,000 | ||
Gross margin | 3,174,000 | 3,420,000 | ||
Selling and administrative expenses | 1,106,000 | 1,608,000 | ||
Net operating income | 2,068,000 | 1,812,000 | ||
Interest expense | 368,000 | 308,000 | ||
Net income before taxes | 1,700,000 | 1,504,000 | ||
Income taxes (30%) | 510,000 | 451,200 | ||
Net income | 1,190,000 | 1,052,800 | ||
Common dividends | 400,000 | 526,400 | ||
Net income retained | 790,000 | 526,400 | ||
Beginning retained earnings | 1,630,000 | 1,103,600 | ||
Ending retained earnings | $ | 2,420,000 | $ | 1,630,000 |
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 | 9.4 | % |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.7 | |
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 $96 per share and that at the end of last year it was $64. 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.
a) | Earning Per Shares = Net Income/ Average Number Of Shares Outstanding | |||
= $1190000/100000 | = $1052800/100000 | |||
= $ 11.9 | = $ 10.53 | |||
b) | The dividend yield ratio = dividend per share/Market price per share | |||
This Year | Last Year | |||
Dividend per share | =$400000/100000 | =$526400/100000 | ||
=$4 per share | =$5.26 per share | |||
The dividend yield ratio. | =$4/96 | =$5.26/64 | ||
=4.2% | =8.2% | |||
c) | ||||
Payout Ratio = Dividend Per Share/ Earning Per Share | ||||
This Year | Last Year | |||
= $4/11.9 | = $5.26/10.53 | |||
= 33.6 % | =50 % | |||
d) | Price Earning Ratio = Market price per share/ Earning per share | |||
This Year | Last Year | |||
=$96/11.9 | =$64/10.53 | |||
=8.07 | =6.08 | |||
e) | Book Value per share = Common stock holders equity/ number of common shares | |||
This Year | Last Year | |||
=9,420,000/100000 | =8,630,000/100000 | |||
=$94.20 | =$86.30 | |||
Let me know the wrong answer, if any. I will correct it immediately. Please upvote. | ||||
Required information [The following information applies to the questions displayed below.] You have just been hired...
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 Assets Current assets: Cash $ 970,000 $ 1,210,000...
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 Assets Current assets: Cash $ 930,000 $ 1,170,000...
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: Last Year Lydex Company Comparative Balance Sheet This Year Assets Current assets: Cash $ 970,000 Marketable securities Accounts receivable, net 2,740,000 Inventory 3,610,000 Prepaid expenses 260,000 Total current...
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 $ 970,000 $ 1,210,000 Marketable securities 0 300,000 Accounts receivable, net 2,740,000 1,840,000 Inventory 3,610,000...
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 Assets Current assets: Cash $ 940,000 $ 1,180,000...
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 Assets Current assets: Cash $ 930,000 $ 1,170,000...
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 Assets Current assets: Cash $ 930,000 $ 1,170,000...
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 Assets Current assets: Cash $ 880,000 $ 1,120,000...
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 Assets Current assets: Cash $ 1,020,000 $ 1,260,000...
[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: Last Year 0 Lydex Company Comparative Balance Sheet This Year Assets Current assets: Cash $ 890,000 Marketable securities Accounts...