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

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			This Year	Last Year
a.	Net income (a)		$       560,000	$       954,100
	Average number of common shares outstanding (b)		100,000	100,000
	Earnings per share (a) ÷ (b)		$              5.60	$              9.54
b.	Dividends per share (a)		$              2.80	$              4.77
	Market price per share (b)		$                  82	$                  50
	Dividend yield ratio (a) ÷ (b)		3.41%	9.54%
c.	Dividends per share (a)		$              2.80	$              4.77
	Earnings per share (b)		$              5.60	$              9.54
	Dividend payout ratio (a) ÷ (b)		50.00%	49.99%
d.	Market price per share (a)		$            82.00	$            50.00
	Earnings per share (b)		$              5.60	$              9.54
	Price-earnings ratio (a) ÷ (b)		$            14.64	$              5.24
e.	Stockholders’ equity (a)		$   8,980,000	$   8,700,000
	Number of common shares outstanding (b)		100,000	100,000
	Book value per share (a) ÷ (b)		$            89.80	$            87.00