You have just been hired as a financial analyst for Lydex Company, a manufacture
ID: 2328607 • Letter: Y
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:
To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
Required:
1. Present the balance sheet in common-size format.
2. Present the income statement in common-size format down through net income.
Present the balance sheet in common-size format. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.)
Lydex CompanyComparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 980,000 $ 1,140,000 Marketable securities 0 300,000 Accounts receivable, net 2,780,000 1,880,000 Inventory 3,620,000 2,200,000 Prepaid expenses 260,000 200,000 Total current assets 7,640,000 5,720,000 Plant and equipment, net 9,560,000 9,070,000 Total assets $ 17,200,000 $ 14,790,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 4,030,000 $ 2,780,000 Note payable, 10% 3,680,000 3,080,000 Total liabilities 7,710,000 5,860,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,990,000 1,430,000 Total stockholders' equity 9,490,000 8,930,000 Total liabilities and stockholders' equity $ 17,200,000 $ 14,790,000
Explanation / Answer
Answer
>Income Statement, all percentage values are calculated by taking ‘Sales’ amount as the denominator value.
Lydex Company
Comparative Balance Sheet
This Year
Last Year
Assets
Current assets:
Cash
$ 980,000.00
5.7%
$ 1,140,000.00
7.7%
Marketable securities
$ -
0.0%
$ 300,000.00
2.0%
Accounts receivable, net
$ 2,780,000.00
16.2%
$ 1,880,000.00
12.7%
Inventory
$ 3,620,000.00
21.0%
$ 2,200,000.00
14.9%
Prepaid expenses
$ 260,000.00
1.5%
$ 200,000.00
1.4%
Total current assets
$ 7,640,000.00
44.4%
$ 5,720,000.00
38.7%
Plant and equipment, net
$ 9,560,000.00
55.6%
$ 9,070,000.00
61.3%
Total assets
$ 17,200,000.00
100.0%
$ 14,790,000.00
100.0%
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities
$ 4,030,000.00
23.4%
$ 2,780,000.00
18.8%
Note payable, 10%
$ 3,680,000.00
21.4%
$ 3,080,000.00
20.8%
Total liabilities
$ 7,710,000.00
44.8%
$ 5,860,000.00
39.6%
Stockholders' equity:
Common stock, $75 par value
$ 7,500,000.00
43.6%
$ 7,500,000.00
50.7%
Retained earnings
$ 1,990,000.00
11.6%
$ 1,430,000.00
9.7%
Total stockholders' equity
$ 9,490,000.00
55.2%
$ 8,930,000.00
60.4%
Total liabilities and stockholders' equity
$ 17,200,000.00
100.0%
$ 14,790,000.00
100.0%
Lydex Company
Comparative Income Statement and Reconciliation
This Year
Last Year
Sales (all on account)
$ 15,880,000.00
100.0%
$ 13,780,000.00
100.0%
Cost of goods sold
$ 12,704,000.00
80.0%
$ 10,335,000.00
75.0%
Gross margin
$ 3,176,000.00
20.0%
$ 3,445,000.00
25.0%
Selling and administrative expenses
$ 1,436,571.00
9.0%
$ 1,612,000.00
11.7%
Net operating income
$ 1,739,429.00
11.0%
$ 1,833,000.00
13.3%
Interest expense
$ 368,000.00
2.3%
$ 308,000.00
2.2%
Net income before taxes
$ 1,371,429.00
8.6%
$ 1,525,000.00
11.1%
Income taxes (30%)
$ 411,429.00
2.6%
$ 457,500.00
3.3%
Net income
$ 960,000.00
6.0%
$ 1,067,500.00
7.7%
Lydex Company
Comparative Balance Sheet
This Year
Last Year
Assets
Current assets:
Cash
$ 980,000.00
5.7%
$ 1,140,000.00
7.7%
Marketable securities
$ -
0.0%
$ 300,000.00
2.0%
Accounts receivable, net
$ 2,780,000.00
16.2%
$ 1,880,000.00
12.7%
Inventory
$ 3,620,000.00
21.0%
$ 2,200,000.00
14.9%
Prepaid expenses
$ 260,000.00
1.5%
$ 200,000.00
1.4%
Total current assets
$ 7,640,000.00
44.4%
$ 5,720,000.00
38.7%
Plant and equipment, net
$ 9,560,000.00
55.6%
$ 9,070,000.00
61.3%
Total assets
$ 17,200,000.00
100.0%
$ 14,790,000.00
100.0%
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities
$ 4,030,000.00
23.4%
$ 2,780,000.00
18.8%
Note payable, 10%
$ 3,680,000.00
21.4%
$ 3,080,000.00
20.8%
Total liabilities
$ 7,710,000.00
44.8%
$ 5,860,000.00
39.6%
Stockholders' equity:
Common stock, $75 par value
$ 7,500,000.00
43.6%
$ 7,500,000.00
50.7%
Retained earnings
$ 1,990,000.00
11.6%
$ 1,430,000.00
9.7%
Total stockholders' equity
$ 9,490,000.00
55.2%
$ 8,930,000.00
60.4%
Total liabilities and stockholders' equity
$ 17,200,000.00
100.0%
$ 14,790,000.00
100.0%
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