Required information
Problem 14-15 Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6]
[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 | $ | 870,000 | $ | 1,110,000 |
Marketable securities | 0 | 300,000 | ||
Accounts receivable, net | 2,340,000 | 1,440,000 | ||
Inventory | 3,510,000 | 2,100,000 | ||
Prepaid expenses | 240,000 | 180,000 | ||
Total current assets | 6,960,000 | 5,130,000 | ||
Plant and equipment, net | 9,340,000 | 8,960,000 | ||
Total assets | $ | 16,300,000 | $ | 14,090,000 |
Liabilities and Stockholders' Equity | ||||
Liabilities: | ||||
Current liabilities | $ | 3,920,000 | $ | 2,800,000 |
Note payable, 10% | 3,600,000 | 3,000,000 | ||
Total liabilities | 7,520,000 | 5,800,000 | ||
Stockholders' equity: | ||||
Common stock, $70 par value | 7,000,000 | 7,000,000 | ||
Retained earnings | 1,780,000 | 1,290,000 | ||
Total stockholders' equity | 8,780,000 | 8,290,000 | ||
Total liabilities and stockholders' equity | $ | 16,300,000 | $ | 14,090,000 |
Lydex Company Comparative Income Statement and Reconciliation |
||||
This Year | Last Year | |||
Sales (all on account) | $ | 15,770,000 | $ | 12,680,000 |
Cost of goods sold | 12,616,000 | 9,510,000 | ||
Gross margin | 3,154,000 | 3,170,000 | ||
Selling and administrative expenses | 1,594,000 | 1,568,000 | ||
Net operating income | 1,560,000 | 1,602,000 | ||
Interest expense | 360,000 | 300,000 | ||
Net income before taxes | 1,200,000 | 1,302,000 | ||
Income taxes (30%) | 360,000 | 390,600 | ||
Net income | 840,000 | 911,400 | ||
Common dividends | 350,000 | 455,700 | ||
Net income retained | 490,000 | 455,700 | ||
Beginning retained earnings | 1,290,000 | 834,300 | ||
Ending retained earnings | $ | 1,780,000 | $ | 1,290,000 |
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
Current ratio | 2.3 | |
Acid-test ratio | 1.0 | |
Average collection period | 30 | days |
Average sale period | 60 | days |
Return on assets | 8.3 | % |
Debt-to-equity ratio | 0.7 | |
Times interest earned ratio | 5.9 | |
Price-earnings ratio | 10 | |
rev: 04_27_2020_QC_CS-209476
Problem 14-15 Part 2
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 $76 per share and that at the end of last year it was $44. 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.
Ans. 2 | ||||
Ans. A | Earnings per share = Net income / Common stock outstanding | |||
This year | $840,000 / 100,000 | $8.40 | per share | |
Last year | $911,400 / 100,000 | $9.11 | per share | |
*Common stock outstanding = Common stock / Par value | ||||
$7,000,000 / $70 | 100000 | |||
Ans. B | Dividend yield ratio = Dividend per share / Stock price per share * 100 | |||
This year | $3.20 / $108 * 100 | 3.0% | ||
Last year | $5.69 / $76 * 100 | 7.5% | ||
*Dividend per share = Common dividends / Common stock outstanding | ||||
This year | $350,000 / 100,000 | $3.50 | per share | |
Last year | $455,700 / 100,000 | $4.56 | per share | |
Ans. C | Payout ratio = Total dividends / Net income | |||
This year | $350,000 / $840,000 * 100 | 41.7% | ||
Last year | $455,700 / $911,400 * 100 | 50.0% | ||
Ans. D | Price earnings ratio = Stock price per share / Earnings per share | |||
This year | $76 / $8.40 | 9.05 | times | |
Last year | $44 / $9.11 | 4.83 | times | |
Ans. E | Book value per share = Total common stockholder's equity / no. of shares outstanding | |||
This year | $8,780,000 / 100,000 | $87.80 | per share | |
Last year | $8,290,000 / 100,000 | $82.90 | per share | |
Required information Problem 14-15 Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] [The following information applies...
Required information Problem 14-15 Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] [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...
Required information Problem 14-15 Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] [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...
Required information Problem 14-15 Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] [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...
Problem 14-15 Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] [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...
Problem 14-15 Comprehensive Ratio Analysis (LO14-2, LO14-3, LO14-4, LO14-5, LO14-6) [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...
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...
pter 14 Homework Assignments - Save Last Year 2 of 3 Comparative Balance sheet This Year Assets Current assets: $ 870,000 Marketable securities Accounts receivable, net 2,340,000 Inventory 3,510,000 Prepaid expenses 240,000 Total current assets 6,960,000 Plant and equipment, net 9,340,000 Total assets $ 16,300,000 Liabilities and Stockholders Equity Liabilities: Current liabilities $ 3,920,000 Note payable, 108 3,600,000 Total liabilities 7.520.000 Stockholders' equity: Common stock, $70 par value 7,000,000 Retained earnings 1,780,000 Total stockholders' equity 8,780,000 Total liabilities and stockholders'...
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...
Please answer part 1, 2 and 3. Required information Problem 15-15 Comprehensive Ratio Analysis [L015-2, Lo15-3, LO15-4, Lo15-5, LO15-6) 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:...