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 |
Marketable securities | 0 | 300,000 | ||
Accounts receivable, net | 2,620,000 | 1,720,000 | ||
Inventory | 3,580,000 | 2,300,000 | ||
Prepaid expenses | 250,000 | 190,000 | ||
Total current assets | 7,390,000 | 5,690,000 | ||
Plant and equipment, net | 9,480,000 | 9,030,000 | ||
Total assets | $ | 16,870,000 | $ | 14,720,000 |
Liabilities and Stockholders' Equity | ||||
Liabilities: | ||||
Current liabilities | $ | 3,990,000 | $ | 2,940,000 |
Note payable, 10% | 3,660,000 | 3,060,000 | ||
Total liabilities | 7,650,000 | 6,000,000 | ||
Stockholders' equity: | ||||
Common stock, $75 par value | 7,500,000 | 7,500,000 | ||
Retained earnings | 1,720,000 | 1,220,000 | ||
Total stockholders' equity | 9,220,000 | 8,720,000 | ||
Total liabilities and stockholders' equity | $ | 16,870,000 | $ | 14,720,000 |
Lydex Company Comparative Income Statement and Reconciliation |
||||
This Year | Last Year | |||
Sales (all on account) | $ | 15,840,000 | $ | 13,380,000 |
Cost of goods sold | 12,672,000 | 10,035,000 | ||
Gross margin | 3,168,000 | 3,345,000 | ||
Selling and administrative expenses | 1,602,000 | 1,596,000 | ||
Net operating income | 1,566,000 | 1,749,000 | ||
Interest expense | 366,000 | 306,000 | ||
Net income before taxes | 1,200,000 | 1,443,000 | ||
Income taxes (30%) | 360,000 | 432,900 | ||
Net income | 840,000 | 1,010,100 | ||
Common dividends | 340,000 | 505,050 | ||
Net income retained | 500,000 | 505,050 | ||
Beginning retained earnings | 1,220,000 | 714,950 | ||
Ending retained earnings | $ | 1,720,000 | $ | 1,220,000 |
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 | 9.1 | % |
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 $90 per share and that at the end of last year it was $58. 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. | |||
Earnings per share | Net income/No of common shares outstanding | ||
No of common shares outstanding | Common stock value/Par value of shares | ||
No of common shares outstanding | 7500000/$75 | ||
No of common shares outstanding | 100,000 | ||
This year | Last year | ||
Earnings per share | 840000/100000 | 1010100/100000 | |
Earnings per share | $8.40 | $10.10 | |
b. | |||
Dividend yield ratio | Dividend/Market price | ||
This year | Last year | ||
Dividend per share | $3.40 | $5.05 | |
340000/100000 | 505050/100000 | ||
Market price per share | $90 | $58 | |
Dividend yield ratio | 3.8% | 8.7% | |
c. | |||
Dividend payout ratio | Dividend/Net income | ||
This year | Last year | ||
Dividend | 340000 | 505050 | |
Net income | 840000 | 1010100 | |
Dividend payout ratio | 40.5% | 50.0% | |
d. | |||
Price-earnings ratio | Market price per share/Earnings per share | ||
This year | Last year | ||
Market price per share | $90.00 | $58.00 | |
Earnings per share | $8.40 | $10.10 | |
Price-earnings ratio | 10.71 | 5.74 | |
e. | |||
Book value per share of common stock | Stockholder's equity/No of shares outstanding | ||
This year | Last year | ||
Stockholder's equity | $9,220,000 | $8,720,000 | |
No of shares outstanding | 100,000 | 100,000 | |
Book value per share of common stock | $92.20 | $87.20 | |
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 $ 940,000 2,620,000 3,580,000 250,000 7,390,000 9,480,000 $...
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 $ 940,000 2,620,000 3,580,000 250,000 7,390,000 9,480,000 $...
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 $ 940,000 2,620,000 3,580,000 250,000 7,390,000 9,480,000 $...
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 $ 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 $ 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 $ 980,000 2,780,000 3,620,000 260,000 7,640,000 9,560,000 $17,...
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...
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...
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 $ 1,040,000 0 3,020,000 3,680,000 270,000 8,010,000 9,680,000...