Question

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 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 Teda om

Answer 1

a)
	Times Interest Earned Ratio = EBIT/ Interest expenses
		This Year	Last Year
		= $1972000/372000	= $1559000/312000
		=5.3 times	=5 times
b)	Debt To Equity Ratio = Total Debt / Total Equity
		This Year	Last Year
		= $7810000/9880000	= $6260000/9080000
		=0.79 times	=0.69 times
c)
	Gross Profit Margin = Gross Profit / Sales
		This Year	Last Year
		= $3188000/15940000	= $3595000/14380000
		=20 %	=25 %
d)	Average Assets = (beginning Assets + ending Assets)/2
		This Year	Last Year
		= ( $15340000+17690000)/2	= ( $13150000+15340000)/2
		= $ 16515000	= $ 14245000
	Return On Assets = Net Income / Average Assets
		This Year	Last Year
		= $1120000/16515000	= $1152900/14245000
		=6.8%	=8.1 %
e)	Average Stockholders Equity = (beginning Stockholders Equity + ending Stockholders Equity)/2
		This Year	Last Year
		= ( $9080000+9880000)/2	= ( $8503350+9080000)/2
		= $ 9480000	= $ 8791675
	Return On Stockholders Equity = Net Income / Average Stockholders Equity
		This Year	Last Year
		= $1120000/9480000	= $1152900/8791675
		=11.8 %	=13.1 %
f)		Positive	Positive
Let me know the wrong answer. I will correct immediately. Please vote positively.