Question

Required information [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 $ 1,040,000 0 3,020,000 3,680,000 270,000 8,010,000 9,680,000 $ 17,690,000 $ 1,280,000 300,000 2,120,000 2,300,000 210,000 6,210,000 9,130,000 $15, 340,000 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, $75 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 4,090,000 3,720,000 7,810,000 $ 3,140,000 3,120,000 6, 260,000 7,500,000 2,380,000 9,880,000 $ 17,690,000 7,500,000 1,580,000 9,080,000 $15, 340,000

Answer 1

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Lydex Company
Income Statement	This Year	Last Year		Answer 1 a	This Year	Last Year
Sales	15,940,000.00	14,380,000.00		Working Capital	3,920,000.00	3,070,000.00
Cost of goods sold	12,752,000.00	10,785,000.00		Current Assets- Current Liabilities
Gross Profit	3,188,000.00	3,595,000.00
Selling and administrative Expense	1,216,000.00	1,636,000.00		Answer 1 b
Net Operating Income	1,972,000.00	1,959,000.00		Current Ratio	1.96	1.98
Interest Expense	372,000.00	312,000.00		Current Assets/Current Liabilities
Net Income before taxes	1,600,000.00	1,647,000.00
Income tax expense	480,000.00	494,100.00		Answer 1 c
Net Income	1,120,000.00	1,152,900.00		Acid Test Ratio	0.99	1.18
Common Dividends	320,000.00	576,450.00		Quick Assets/Current Liabilities
Net Income retained	800,000.00	576,450.00
Beginning retained Earnings	1,580,000.00	1,003,550.00		Answer 1 d
Ending retained Earnings	2,380,000.00	1,580,000.00		Average Collection Period	58.85	49.12
				365/ Accounts Receivables Turnover
Balance Sheet
Assets	This Year	Last Year		Accounts Receivables Turnover	6.20	7.43
Current Assets				Sales Revenue/ Average Receivable
Cash	1,040,000.00	1,280,000.00
Marketable Securities	-	300,000.00		Answer 1 e
Accounts Receivable (net)	3,020,000.00	2,120,000.00		Average Sale Period	85.58	74.62
Inventory	3,680,000.00	2,300,000.00		365/Inventory Turnover
Prepaid Expenses	270,000.00	210,000.00
Total Current Assets	8,010,000.00	6,210,000.00		Inventory Turnover	4.26	4.89
Plant & equipment, net	9,680,000.00	9,130,000.00		Cost of goods sold/Average Inventory
Total Assets	17,690,000.00	15,340,000.00
				Answer 1 f
Liabilities & Stockholders' Equity				Operating cycle
Liabilities				Average collection period	58.85	49.12
Current Liabilities	4,090,000.00	3,140,000.00		Add: Average Sale Period	85.58	74.62
Note payable, 10%	3,720,000.00	3,120,000.00		Operating cycle	144.43	123.74
Total Liabilities	7,810,000.00	6,260,000.00
Stockholders' Equity				Ans 1 g
Common Stock $ 75 par	7,500,000.00	7,500,000.00		Total asset Turnover	0.97	0.96
Retained Earnings	2,380,000.00	1,580,000.00		Sales Revenue/ Average Total Assets
Total Stockholders' Equity	9,880,000.00	9,080,000.00
Total Liabilities & Stockholders' Equity	17,690,000.00	15,340,000.00
Total Current Assets	8,010,000.00	6,210,000.00
Less:
Inventory	3,680,000.00	2,300,000.00
Prepaid Expense	270,000.00	210,000.00
Quick Assets	4,060,000.00	3,700,000.00
Workings	This Year	Last Year		Workings	Last Year	Beginning of Last Year
Accounts Receivable (net)	3,020,000.00	2,120,000.00		Accounts Receivable (net)	2,120,000.00	1,750,000.00
Average Receivable (net)	2,570,000.00			Average Receivable (net)	1,935,000.00
Merchandise Inventory	3,680,000.00	2,300,000.00		Merchandise Inventory	2,300,000.00	2,110,000.00
Average Inventory	2,990,000.00			Average Inventory	2,205,000.00
Total assets	17,690,000.00	15,340,000.00		Total assets	15,340,000.00	14,690,000.00
Average assets	16,515,000.00			Average assets	15,015,000.00