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15 Mar 2018
PROBLEM 15-15 Comprehensive Ratio Analysis (L015-2, L015-3, L015-4, L015-5, L015-6] You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety hel- mets. 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 $ 960,000 0 2,700,000 3,900,000 240,000 7,800,000 9,300,000 $17,100,000 $ 1,260,000 300,000 1,800,000 2,400,000 180,000 5,940,000 8,940,000 $14,880,000 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, $78 par value ......... Retained earnings .................. Total stockholders' equity .............. Total liabilities and stockholders' equity.... $ 3,900,000 3,600,000 7,500,000 $2,760,000 3,000,000 5,760,000 7,800,000 1,800,000 9,600,000 $17,100,000 7,800,000 1,320,000 9,120,000 $14,880,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) ........... $15,750,000 $12,480,000 Cost of goods sold ...... 12,600,000 9,900,000 Gross margin ....................... 3,150,000 2,580,000 Selling and administrative expenses ...... 1,590,000 1,560,000 Net operating income.................. 1,560,000 1,020,000 Interest expense ...................... 360,000 300,000 Net income before taxes ............. 1,200,000 720,000 Income taxes (30%) .......... 360.000 216,000 Net income ....... 840,000 504,000 Common dividends .... 360,000 252,000 Net income retained. 480,000 252,000 Beginning retained earnings ............ 1,320,000 1,068,000 Ending retained earnings .......... $ 1,800,000 $ 1,320,000 PROBLEM 15-16 Common-Size Financial Statements [L015-1] Refer to the financial statement data for Lydex Company given in Problem 15-15. Required: For both this year and last year: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. 3. Comment on the results of your analysis.
PROBLEM 15-15 Comprehensive Ratio Analysis (L015-2, L015-3, L015-4, L015-5, L015-6] You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety hel- mets. 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 $ 960,000 0 2,700,000 3,900,000 240,000 7,800,000 9,300,000 $17,100,000 $ 1,260,000 300,000 1,800,000 2,400,000 180,000 5,940,000 8,940,000 $14,880,000 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, $78 par value ......... Retained earnings .................. Total stockholders' equity .............. Total liabilities and stockholders' equity.... $ 3,900,000 3,600,000 7,500,000 $2,760,000 3,000,000 5,760,000 7,800,000 1,800,000 9,600,000 $17,100,000 7,800,000 1,320,000 9,120,000 $14,880,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) ........... $15,750,000 $12,480,000 Cost of goods sold ...... 12,600,000 9,900,000 Gross margin ....................... 3,150,000 2,580,000 Selling and administrative expenses ...... 1,590,000 1,560,000 Net operating income.................. 1,560,000 1,020,000 Interest expense ...................... 360,000 300,000 Net income before taxes ............. 1,200,000 720,000 Income taxes (30%) .......... 360.000 216,000 Net income ....... 840,000 504,000 Common dividends .... 360,000 252,000 Net income retained. 480,000 252,000 Beginning retained earnings ............ 1,320,000 1,068,000 Ending retained earnings .......... $ 1,800,000 $ 1,320,000 PROBLEM 15-16 Common-Size Financial Statements [L015-1] Refer to the financial statement data for Lydex Company given in Problem 15-15. Required: For both this year and last year: 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. 3. Comment on the results of your analysis.
Reid WolffLv2
16 Mar 2018
Related questions
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 companyâs financialstatements, including comparing Lydexâs performance to its majorcompetitors. The companyâs 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 Companyâs 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, finally, to assess the companyâs liquidity andasset management. For both this year and last year, compute:(Use 365 days in a year. Round "days" intermediatecalculations and final answers to 1 decimal place. Round all otherintermediate calculations and final answers to 2 decimalplaces.) |
| a. | Working capital. |
| b. | The current ratio. |
| c. | The acid-test ratio. |
| d. | The average collection period.(The accounts receivable at the beginning of last year totaled$1,560,000.) |
| e. | The average sale period. (Theinventory at the beginning of last year totaled $1,920,000.) |
| f. | The operating cycle. |
| g. | The total asset turnover. (Thetotal assets at the beginning of last year totaled$12,960,000.) |
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 companyâs financialstatements, including comparing Lydexâs performance to its majorcompetitors. The companyâs 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 Companyâs 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 |
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