Required informationSkip 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 CompanyComparative Balance Sheet This YearLast YearAssets Current assets: Cash$1,020,000$1,260,000Marketable securities 0 300,000Accounts receivable, net 2,940,000 2,040,000Inventory 3,660,000 2,100,000Prepaid expenses 270,000 210,000Total current assets 7,890,000 5,910,000Plant and equipment, net 9,640,000 9,110,000Total assets$17,530,000$15,020,000Liabilities and Stockholders' Equity Liabilities: Current liabilities$4,070,000$3,100,000Note payable, 10% 3,700,000 3,100,000Total liabilities 7,770,000 6,200,000Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000Retained earnings 2,260,000 1,320,000Total stockholders' equity 9,760,000 8,820,000Total liabilities and stockholders' equity$17,530,000$15,020,000 Lydex CompanyComparative Income Statement and Reconciliation This YearLast YearSales (all on account)$15,920,000$14,180,000Cost of goods sold 12,736,000 10,635,000Gross margin 3,184,000 3,545,000Selling and administrative expenses 1,014,000 1,628,000Net operating income 2,170,000 1,917,000Interest expense 370,000 310,000Net income before taxes 1,800,000 1,607,000Income taxes (30%) 540,000 482,100Net income 1,260,000 1,124,900Common dividends 320,000 562,450Net income retained 940,000 562,450Beginning retained earnings 1,320,000 757,550Ending retained earnings$2,260,000$1,320,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry: Current ratio2.3 Acid-test ratio1.1 Average collection period32daysAverage sale period60daysReturn on assets9.9%Debt-to-equity ratio0.7 Times interest earned ratio5.9 Price-earnings ratio10 rev: 04_27_2020_QC_CS-209476 2. You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $106 per share and that at the end of last year it was $74. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.) 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 of common stock.

Solution- Number of common shares = Total Common share capital /par value of share Dividend per…

Answered: You have just been hired as a financial…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 60P

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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:

Lydex Company Comparative Balance Sheet
	This Year	Last Year
Assets
Current assets:
Cash	$	1,020,000	$	1,260,000
Marketable securities		0		300,000
Accounts receivable, net		2,940,000		2,040,000
Inventory		3,660,000		2,100,000
Prepaid expenses		270,000		210,000
Total current assets		7,890,000		5,910,000
Plant and equipment, net		9,640,000		9,110,000
Total assets	$	17,530,000	$	15,020,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	4,070,000	$	3,100,000
Note payable, 10%		3,700,000		3,100,000
Total liabilities		7,770,000		6,200,000
Stockholders' equity:
Common stock, $75 par value		7,500,000		7,500,000
Retained earnings		2,260,000		1,320,000
Total stockholders' equity		9,760,000		8,820,000
Total liabilities and stockholders' equity	$	17,530,000	$	15,020,000

Lydex Company Comparative Income Statement and Reconciliation
	This Year	Last Year
Sales (all on account)	$	15,920,000	$	14,180,000
Cost of goods sold		12,736,000		10,635,000
Gross margin		3,184,000		3,545,000
Selling and administrative expenses		1,014,000		1,628,000
Net operating income		2,170,000		1,917,000
Interest expense		370,000		310,000
Net income before taxes		1,800,000		1,607,000
Income taxes (30%)		540,000		482,100
Net income		1,260,000		1,124,900
Common dividends		320,000		562,450
Net income retained		940,000		562,450
Beginning retained earnings		1,320,000		757,550
Ending retained earnings	$	2,260,000	$	1,320,000

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	1.1
Average collection period	32	days
Average sale period	60	days
Return on assets	9.9	%
Debt-to-equity ratio	0.7
Times interest earned ratio	5.9
Price-earnings ratio	10

rev: 04_27_2020_QC_CS-209476

2. You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $106 per share and that at the end of last year it was $74. For both this year and last year, compute: (Round your "Percentage" answers to 1 decimal place and other intermediate and final answers to 2 decimal places.)

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 of common stock.

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