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You have just been hired as a financial analyst for LydexCompany, a manufacturer of safety helmets. Your boss has asked youto perform a comprehensive analysis of the company’s financialstatements, including comparing Lydex’s performance to its majorcompetitors. The company’s financial statements for the last twoyears are as follows:

Lydex Company
Comparative Balance Sheet
This Year Last Year
Assets
Currentassets:
Cash $ 960,000 $ 1,260,000
Marketable securities 0 300,000
Accounts receivable, net 2,700,000 1,800,000
Inventory 3,900,000 2,400,000
Prepaid expenses 240,000 180,000
Total currentassets 7,800,000 5,940,000
Plant and equipment,net 9,300,000 8,940,000
Total assets $ 17,100,000 $ 14,880,000
Liabilities andStockholders' Equity
Liabilities:
Current liabilities $ 3,900,000 $ 2,760,000
Note payable, 10% 3,600,000 3,000,000
Totalliabilities 7,500,000 5,760,000
Stockholders'equity:
Common stock, $78 parvalue 7,800,000 7,800,000
Retained earnings 1,800,000 1,320,000
Total stockholders'equity 9,600,000 9,120,000
Total liabilitiesand stockholders' equity $ 17,100,000 $ 14,880,000
Lydex Company
Comparative Income Statement and Reconciliation
This Year Last Year
Sales (all onaccount) $ 15,750,000 $ 12,480,000
Cost of goodssold 12,600,000 9,900,000
Gross margin 3,150,000 2,580,000
Selling andadministrative expenses 1,590,000 1,560,000
Net operatingincome 1,560,000 1,020,000
Interestexpense 360,000 300,000
Net income beforetaxes 1,200,000 720,000
Income taxes(30%) 360,000 216,000
Net income 840,000 504,000
Commondividends 360,000 252,000
Net incomeretained 480,000 252,000
Beginning retainedearnings 1,320,000 1,068,000
Ending retainedearnings $ 1,800,000 $ 1,320,000

To begin yourassigment you gather the following financial data and ratios thatare typical of companies in Lydex Company’s industry:

Current ratio 2.3
Acid-test ratio 1.2
Average collectionperiod 30 days
Average saleperiod 60 days
Return onassets 9.5 %
Debt-to-equityratio 0.65
Times interestearned ratio 5.7
Price-earningsratio 10

1. You decide next to assess the company’s stock marketperformance. Assume that Lydex’s stock price at the end of thisyear is $72 per share and that at the end of last year it was $40.For both this year and last year, compute: (Round yourintermediate calculations and final percentage answers to 1 decimalplace. i.e., 0.123 should be considered as 12.3%. Round the rest ofthe intermediate calculations and final answers to 2 decimalplaces.)

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 ofcommon stock.


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Deanna Hettinger
Deanna HettingerLv2
28 Sep 2019

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