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 Assets Current assets: $ 1,140,000 300,000 1,560,000 2,400,000 190,000 5,590,000 8,990,000 Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets 900,000 2,460,000 3,540,000 250,000 7,150,000 9,400,000 Plant and equipment, net $16,550,000 $14,580,000 Total assets Liabilities and Stockholders' Equity Liabilities: $ 3,950,000 3,620,000 7,570,000 $ 2,860,000 3,020,000 5,880,000 Current liabilities Note payable, 10% Total liabiliti Stockholders' equity: Common stock, $75 par value Retained earnings Total stockholders' equity 7,500,000 1,200,000 8,700,000 7,500,000 1,480,000 8,980,000 $14,580,000 $16,550,000 Total liabilities and stockholders' equity Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense $15,800,000 $12,980,000 9,735,000 3,245,000 1,580,000 1,665,000 302,000 12,640,000 3,160,000 1,998,000 1,162,000 362,000 Net income before taxes 1,363,000 800,000 240,000 Income taxes (30%) 408,900 Net income 560,000 280,000 954,100 477,050 477,050 Common dividends Net income retained 280,000

Answer 1

12-MET M2-WHIT 02-CHIC 102-META M2-META 112-PEAR 170 (Luxury 133 (Cream 233 (Gamet 233 TITAN 262-LIME GF 62-MIDNIGH 62-Orange 262-WHITE 162-WINE REE 392-CERAMIC THOINIWF761 392-WINE REC 500-CHIC WHIT 500-DARK BLL 162-BLACK SI 162.PURE WHIT 982-BLACKS DO 182-PURE WHITE arried Ove In tt fran true This yeas Last year c d Com Return on total Assch Net Income Total Assets 7 280,000 1.69% com; This comp entity Com (a) F 477050 14.580.000 3.27% (b) F E Secto cond e Return on Equity - NRt Income Total Shareholdes's Equity → 280.000 / 89.80,000 3.127 Pers Com 5.48% audi Com cone cond 1) Company's Financial 7 heverage Ratio - Total Company Debt share holdes's equity - 75.70,000/8 980,000 >> 58,80,000/ 8400.000 Position of Leverage 0.84 0.68 positive pri Positive

02-7 22-. 22-W 3W-00 W-00 Od of 10 Po. 10 PO 20-MET 30-SHAC 30-SHAD 30 (White 30-WHITE 80-Wine R 30-WNER 60-METAL 30-SILVER 52-METALL 10_MODER 12_RUBY RE 12 SHADOW arried o Leverage Ratio are used to deterenine the relative level of debt that a business has incurred. A high ratio indicates that the bulk of assets puschans are Positive leverage is when a business or indiricual borrows funds and then invests the hands at an interest nate higher than the rate at which they were borrowed. In this particulary company, Debt found are less than Equity feend. So, the position should be positive for the plas both this and last year.