Please answer D, E and F Problem 14-15 (Algo) Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] Skip to question [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 $ 860,000 $ 1,100,000 Marketable securities 0 300,000 Accounts receivable, net 2,300,000 1,400,000 Inventory 3,500,000 2,000,000 Prepaid expenses 240,000 180,000 Total current assets 6,900,000 4,980,000 Plant and equipment, net 9,320,000 8,950,000 Total assets $ 16,220,000 $ 13,930,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,910,000 $ 2,780,000 Note payable, 10% 3,600,000 3,000,000 Total liabilities 7,510,000 5,780,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,210,000 650,000 Total stockholders' equity 8,710,000 8,150,000 Total liabilities and stockholders' equity $ 16,220,000 $ 13,930,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,760,000 $ 12,580,000 Cost of goods sold 12,608,000 9,435,000 Gross margin 3,152,000 3,145,000 Selling and administrative expenses 1,592,000 1,564,000 Net operating income 1,560,000 1,581,000 Interest expense 360,000 300,000 Net income before taxes 1,200,000 1,281,000 Income taxes (30%) 360,000 384,300 Net income 840,000 896,700 Common dividends 280,000 448,350 Net income retained 560,000 448,350 Beginning retained earnings 650,000 201,650 Ending retained earnings $ 1,210,000 $ 650,000 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 8.2% Debt-to-equity ratio 0.7 Times interest earned ratio 5.8 Price-earnings ratio 10 Problem 14-15 Part 1 (Algo) Required: 1. You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equity ratio. c. The gross margin percentage. d. The return on total assets. (Total assets at the beginning of last year were $12,970,000.) e. The return on equity. (Stockholders’ equity at the beginning of last year totaled $7,701,650. There has been no change in common stock over the last two years.) f. Is the company’s financial leverage positive or negative?

Please answer D, E and F Problem 14-15 (Algo) Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6] Skip to question [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 $ 860,000 $ 1,100,000 Marketable securities 0 300,000 Accounts receivable, net 2,300,000 1,400,000 Inventory 3,500,000 2,000,000 Prepaid expenses 240,000 180,000 Total current assets 6,900,000 4,980,000 Plant and equipment, net 9,320,000 8,950,000 Total assets $ 16,220,000 $ 13,930,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,910,000 $ 2,780,000 Note payable, 10% 3,600,000 3,000,000 Total liabilities 7,510,000 5,780,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,210,000 650,000 Total stockholders' equity 8,710,000 8,150,000 Total liabilities and stockholders' equity $ 16,220,000 $ 13,930,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $ 15,760,000 $ 12,580,000 Cost of goods sold 12,608,000 9,435,000 Gross margin 3,152,000 3,145,000 Selling and administrative expenses 1,592,000 1,564,000 Net operating income 1,560,000 1,581,000 Interest expense 360,000 300,000 Net income before taxes 1,200,000 1,281,000 Income taxes (30%) 360,000 384,300 Net income 840,000 896,700 Common dividends 280,000 448,350 Net income retained 560,000 448,350 Beginning retained earnings 650,000 201,650 Ending retained earnings $ 1,210,000 $ 650,000 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 8.2% Debt-to-equity ratio 0.7 Times interest earned ratio 5.8 Price-earnings ratio 10 Problem 14-15 Part 1 (Algo) Required: 1. You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equity ratio. c. The gross margin percentage. d. The return on total assets. (Total assets at the beginning of last year were $12,970,000.) e. The return on equity. (Stockholders’ equity at the beginning of last year totaled $7,701,650. There has been no change in common stock over the last two years.) f. Is the company’s financial leverage positive or negative?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.2.3MBA

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Problem 14-15 (Algo) Comprehensive Ratio Analysis [LO14-2, LO14-3, LO14-4, LO14-5, LO14-6]

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[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:

	This Year	Last Year
Lydex Company Comparative Balance Sheet
Assets
Current assets:
Cash	$ 860,000	$ 1,100,000
Marketable securities	0	300,000
Accounts receivable, net	2,300,000	1,400,000
Inventory	3,500,000	2,000,000
Prepaid expenses	240,000	180,000
Total current assets	6,900,000	4,980,000
Plant and equipment, net	9,320,000	8,950,000
Total assets	$ 16,220,000	$ 13,930,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$ 3,910,000	$ 2,780,000
Note payable, 10%	3,600,000	3,000,000
Total liabilities	7,510,000	5,780,000
Stockholders' equity:
Common stock, $75 par value	7,500,000	7,500,000
Retained earnings	1,210,000	650,000
Total stockholders' equity	8,710,000	8,150,000
Total liabilities and stockholders' equity	$ 16,220,000	$ 13,930,000

	This Year	Last Year
Lydex Company Comparative Income Statement and Reconciliation
Sales (all on account)	$ 15,760,000	$ 12,580,000
Cost of goods sold	12,608,000	9,435,000
Gross margin	3,152,000	3,145,000
Selling and administrative expenses	1,592,000	1,564,000
Net operating income	1,560,000	1,581,000
Interest expense	360,000	300,000
Net income before taxes	1,200,000	1,281,000
Income taxes (30%)	360,000	384,300
Net income	840,000	896,700
Common dividends	280,000	448,350
Net income retained	560,000	448,350
Beginning retained earnings	650,000	201,650
Ending retained earnings	$ 1,210,000	$ 650,000

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	8.2%
Debt-to-equity ratio	0.7
Times interest earned ratio	5.8
Price-earnings ratio	10

Problem 14-15 Part 1 (Algo)

Required:

1. You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your "Percentage" answers to 1 decimal place and other answers to 2 decimal places.)

a. The times interest earned ratio.

b. The debt-to-equity ratio.

c. The gross margin percentage.

d. The return on total assets. (Total assets at the beginning of last year were $12,970,000.)

e. The return on equity. (Stockholders’ equity at the beginning of last year totaled $7,701,650. There has been no change in common stock over the last two years.)

f. Is the company’s financial leverage positive or negative?

a. The times interest earned ratio
b. The debt-to-equity ratio
c. The gross margin percentage
d. The return on total assets
e. The return on equity
f. Is the company's financial leverage positive or negative?
This Year
%
%
%
Last Year

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