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: Last Year Lydex Company Comparative Balance Sheet This Year Assets Current assets: Cash $ 900,000 Marketable securities Accounts receivable, net 2,460,000 Inventory 3,540,000 Prepaid expenses 250,000 Total current assets 7,150,000 Plant and equipment, net 9,400,000 Total assets $ 16,550,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,950,000 Note payable, 10% 3,620,000 Total liabilities 7,570,000 Stockholders' equity: Common stock, $75 par value 7,500,000 Retained earnings 1,480,000 Total stockholders' equity 8,980,000 Total liabilities and stockholders' equity $ 16,550,000 $ 1,140,000 300,000 1,560,000 2,400,000 190,000 5,590,000 8,990,000 $14,580,000 $ 2,860,000 3,020,000 5,880,000 7,500,000 1,200,000 8,700,000 $14,580,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $15,800,000 $12,980,000 Cost of goods sold 12,640,000 9,735,000 Gross margin 3,160,000 3,245,000 Selling and administrative expenses 1,998,000 1,580,000 Net operating income 1,162,000 1,665,000 Interest expense 362,000 302,000 Net income before taxes 800,000 1,363,000 Income taxes (30%) 240,000 408,900 Net income 560,000 954,100 Common dividends 280,000 477,050 Net income retained 280,000 477,050 Beginning retained earnings 1,200,000 722,950 Ending retained earnings $ 1,480,000 $ 1,200,000

Answer 1

salution Computation of financial Ration Panticular Lout year This yea7 27,30,000 (9 Harking capital E CUMent assets - cUzant Liability 32,00,00 0 (55,9yc00 - 28,6o,c00) (71,5 0,000 - 39,50,co0) c6 Currunt Ratio = CUNTA Fot Assota corunt liability 1.95 2.42 7,50,000 [ 55,90,000 28,60, 000 39,50,000 • 85 1,05 Acid Test Ratio = (CI (7.50,000 -3 5,40,000 –2,5,00 39,50,000 55,99000 - 24,00.cco - 1,90,000 Ciran nt Asset -Thuonteny -brepaid Expenso 20,60,000 CANTent liability 46.43 days га 10 рос 15 000 000 44.50 days 15,05,000x365 Id)Aunage callection Roniod = AUnoge Accounts rocod.abdx365 Net saicredit sale *365- 12,980,000 * Alwwage Accaunt rceivable = opuing +clasing opening tulosing 15,60,000 HAGFOOA + 2Y,60,00 16,10,000+1560,000 2. 2030,000 20,1,000 15,85,000 dramy

0 5.76 days (2) Auwage salr puricd=> 01.92 dy 21,05,c00 Av.onage Inusntary Cast of sal 29,70,000 X 365 X365 *365 1 2,640000 97,35, 000 ohening inuitoy + chirg skaninginuntuny t * Auerage Inuendory 2. 19,70,000+ 24,cg co o - 24,00,000+ 3S, 49000 21,85, 000 29,70,000 132.19 days 126.5 E) opurating ycle = Jhunbry poried + Account Recaivable Period. [01.92 dayst 44 5oday] [o5.76dayst 4 6143 day: ] • 89 (G) Total asset tuomour 12,90G c00 15, 0 00,00 0 l4,5 0o000 + 6550000 Not sale Total 14550000+14 58Oc0/2 Auenagasset