Question

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 $ 1,050,000 0 3,060,000 3,400,000 240,000 7,750,000 9,700,000 $ 17,450,000 $ 1,290,000 300,000 2,160,000 2,400,000 220,000 6, 370,000 9, 140,000 $15,510,000 Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% Total liabilities Stockholders' equity: Common stock, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 4,400,000 3,720,000 8,120,000 $ 3,160,000 3,120,000 6,280,000 7,000,000 2,330,000 9,330,000 $ 17,450,000 7,000,000 2,230,000 9, 230,000 $15,510,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,950,000 $ 14,480,000 Cost of goods sold 12,760,000 10,860,000 Gross margin 3,190,000 3,620,000 Selling and administrative expenses 1,918,000 1,640,000 Net operating income 1,272,000 1,980,000 Interest expense 372,000 312,000 Net income before taxes 900,000 1,668,000 Income taxes (30%) 270,000 500,400 Net income 630,000 1,167,600 Common dividends 530,000 583,800 Net income retained 100,000 583,800 Beginning retained earnings 2,230,000 1,646,200 Ending retained earnings $ 2,330,000 $ 2,230,000

Answer 1

2.

a) Earning per share= Net Income/No. of shares outstanding

	This Year	last Year
Net Income(A)	630,000	1,167,600
No of Shares(B)	100,000	100,000
Earning per share(C)=(A)/(B)	6.3	11.676

b) Dividend yield Ratio= Dividend per share/Market price per share

	This Year	last Year
Dividend(A)	530,000	583,800
No of Shares(B)	100,000	100,000
Dividend per share(C)=(A)/(B)	5.3	5.838
Market price per Share(D)	112	80
Dividend yield Ratio=(C)/(D)	4.7%	7.3%

c) Dividend payout ratio= Dividend per share/Earning per share

	This Year	last Year
Dividend per share(A)	5.3	5.838
Earning per share(B)	6.3	11.676
Dividend payout ratio(C)=(A)/(B)	84.1%	0.5%

d) Price earning ratio= Market price per Share/ Earning Per share

	This Year	last Year
Market price per Share(A)	112	80
Earning per share(B)	6.3	11.676
Price earning ratio(C)=(A)/(B)	17.78	6.85

e) Book Value per share= Total Shareholder's Equity/ No. of shares outstanding

	This Year	last Year
Total Shareholders' Equity (A)	9,330,000	9,230,000
No of Shares(B)	100,000	100,000
Book Value per share(C)=(A)/(B)	93.3	92.3

3.

a) Working Capital= Current Assets-Current Liabilities

	This Year	last Year
Current Assets(A)	7,750,000	6,370,000
Current Liabilities(B)	4,400,000	3,160,000
Working Capital(A)-(B)	3,350,000	3,210,000

b) The current Ratio= Current Liabilities/Current Assets

	This Year	last Year
Current Assets(A)	7,750,000	6,370,000
Current Liabilities(B)	4,400,000	3,160,000
Current Ratio(A)/(B)	1.76	2.02

c)Acid test Ratio=(Current Assets- Inventory-prepaid Exp)/ Current Liabilities

	This Year	last Year
Current Assets(A)	7,750,000	6,370,000
Inventory(B)	3,400,000	2,400,000
Prepaid Expenses(C)	240,000	220,000
Quick Assets(D)=(A)-(B)-(C)	4,110,000	3,750,000
Current Liabilities(E)	4,400,000	3,160,000
Acid Test Ratio(A)/(E)	0.93	1.19

d) Average collection period=365/Account Receivable Turnover

	This Year	last Year
Net credit Sales(A)	15,950,000	14,480,000
Average Account Receivable(B)	2610000	1960000
Account Receivable Turnover Ratio(C)=(A)/(B)	6.11	7.39
Average Collection period=365/(C)	59.74 days	49.39 Days
Account Receivable, Beginning(D)	2160000	1760000
Account Receivable, Ending(E)	3060000	2160000
Average Account Receivable(D)+(E)/2	2,610,000	1960000

e) Average Sale period=365/Inventory Turnover

	This Year	last Year
Cost of Goods Sold(A)	12760000	10860000
Average Inventories(B)	2900000	2260000
Inventory Turnover Ratio(C)=(A)/(B)	4.4	4.81
Average Sale period=365/(C)	82.95 days	75.88 days
Inventory, Beginning(D)	2,400,000	2120000
Inventory, Ending(E)	3,400,000	2,400,000
Average Inventory(D)+(E)/2	2900000	2260000

f) Operatig Cycle=Average collection period+Average Sale period

	This Year	last Year
Average Collection period(A)	59.74 days	49.39 Days
Average Sale period(B)	82.95 days	75.88 days
Operatig Cycle(C)=(A)+(B)	142.69 days	125.27 days

g) Total asset Turnover=Net Sales/Average Total Asset

	This Year	last Year
Net credit Sales(A)	15,950,000	14,480,000
Average Total Assets(B)	16,480,000	14,335,000
total assets Turnover (C)=(A)/(B)	0.97	1.01
Total Assets, Beginning(D)	15,510,000	13160000
Total Assets, Ending(E)	17,450,000	15,510,000
Average Total Assets(D)+(E)/2	16,480,000	14,335,000

please Rate if it helps you or let me know if anything else.