3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: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.) AssetsCurrent assets:CashMarketable securitiesAccounts receivable, netInventoryPrepaid expensesLydex CompanyComparative Balance SheetTotal current assetsPlant and equipment, netTotal assetsLiabilities and Stockholders' EquityLiabilities:Current liabilitiesNote payable, 10%Total liabilitiesStockholders' equity:Common stock, $78 par valueRetained earningsThis Year$ 960,000$ 1,260,000300,0002,700,0001,800,0003,900,0002,400,000240,000180,0007,800,000 5,940,0009,300,0008,940,000$17,100,000 $14,880,0000$ 3,900,0003,600,0007,500,000Last Year7,800,0001,800,000Total stockholders' equity9,600,000Total liabilities and stockholders' equity $17,100,000$ 2,760,0003,000,0005,760,0007,800,0001,320,0009,120,000$14,880,000 Lydex CompanyComparative Income Statement and ReconciliationSales (all on account)Cost of goods soldGross marginSelling and administrative expensesNet operating incomeInterest expenseNet income before taxesIncome taxes (30%)Net incomeCommon dividendsNet income retainedBeginning retained earningsEnding retained earningsThis Year Last Year$15,750,000 $12,480,00012,600,000 9,900,0003,150,000 2,580,0001,590,0001,560,0001,560,0001,020,000360,000300,0001,200,000720,000360,000216,000840,000504,000360,000252,000480,000252,0001,320,000 1,068,000$1,800,000 $1,320,000To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company'sindustry:Current ratioAcid-test ratioAverage collection periodAverage sale periodReturn on assetsDebt-to-equity ratioTimes interest earned ratioPrice-earnings ratio2.31.230 days60 days9.5%0.655.710

WORKING CAPITAL Working Capital is the Difference between Current Assets & Current Liabilities.…

You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. c. The acid-test ratio. d. The average collection period.

You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. c. The acid-test ratio. d. The average collection period.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4E

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