You have just been hired as a financial analyst for Lydex Company, a manufacture
ID: 2333248 • 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.)
Present the income statement in common-size format down through net income. (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 $ 940,000 $ 1,200,000 Marketable securities 0 300,000 Accounts receivable, net 2,620,000 1,720,000 Inventory 3,580,000 2,300,000 Prepaid expenses 250,000 190,000 Total current assets 7,390,000 5,710,000 Plant and equipment, net 9,480,000 9,030,000 Total assets $ 16,870,000 $ 14,740,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 3,880,000 $ 2,940,000 Note payable, 10% 3,660,000 3,060,000 Total liabilities 7,540,000 6,000,000 Stockholders' equity: Common stock, $75 par value 7,500,000 7,500,000 Retained earnings 1,830,000 1,240,000 Total stockholders' equity 9,330,000 8,740,000 Total liabilities and stockholders' equity $ 16,870,000 $ 14,740,000
Explanation / Answer
Answers
>Asset % is calculated by putting Total Asset balance as denominator.
>Liabilities &b Equity’s % is calculated by putting Total Liabilities & Stockholder’s Equity amount.
Lydex Company
Comparative Balance Sheet
This Year
Last Year
Assets
Current assets:
Cash
$ 940,000.00
5.6%
$ 1,200,000.00
8.1%
Marketable securities
$ -
0.0%
$ 300,000.00
2.0%
Accounts receivable, net
$ 2,620,000.00
15.5%
$ 1,720,000.00
11.7%
Inventory
$ 3,580,000.00
21.2%
$ 2,300,000.00
15.6%
Prepaid expenses
$ 250,000.00
1.5%
$ 190,000.00
1.3%
Total current assets
$ 7,390,000.00
43.8%
$ 5,710,000.00
38.7%
Plant and equipment, net
$ 9,480,000.00
56.2%
$ 9,030,000.00
61.3%
Total assets
$ 16,870,000.00
100.0%
$ 14,740,000.00
100.0%
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities
$ 3,880,000.00
23.0%
$ 2,940,000.00
19.9%
Note payable, 10%
$ 3,660,000.00
21.7%
$ 3,060,000.00
20.8%
Total liabilities
$ 7,540,000.00
44.7%
$ 6,000,000.00
40.7%
Stockholders' equity:
Common stock, $75 par value
$ 7,500,000.00
44.5%
$ 7,500,000.00
50.9%
Retained earnings
$ 1,830,000.00
10.8%
$ 1,240,000.00
8.4%
Total stockholders' equity
$ 9,330,000.00
55.3%
$ 8,740,000.00
59.3%
Total liabilities and stockholders' equity
$ 16,870,000.00
100.0%
$ 14,740,000.00
100.0%
Common Size Income Statement
>percentage value is calculated by putting Sales amount as ‘denominator’
Lydex Company
Comparative Income Statement and Reconciliation
This Year
Last Year
Sales (all on account)
$ 15,840,000.00
100.0%
$ 13,380,000.00
100.0%
Cost of goods sold
$ 12,672,000.00
80.0%
$ 10,035,000.00
75.0%
Gross margin
$ 3,168,000.00
20.0%
$ 3,345,000.00
25.0%
Selling and administrative expenses
$ 1,473,429.00
9.3%
$ 1,596,000.00
11.9%
Net operating income
$ 1,694,571.00
10.7%
$ 1,749,000.00
13.1%
Interest expense
$ 366,000.00
2.3%
$ 306,000.00
2.3%
Net income before taxes
$ 1,328,571.00
8.4%
$ 1,443,000.00
10.8%
Income taxes (30%)
$ 398,571.00
2.5%
$ 432,900.00
3.2%
Net income
$ 930,000.00
5.9%
$ 1,010,100.00
7.5%
Lydex Company
Comparative Balance Sheet
This Year
Last Year
Assets
Current assets:
Cash
$ 940,000.00
5.6%
$ 1,200,000.00
8.1%
Marketable securities
$ -
0.0%
$ 300,000.00
2.0%
Accounts receivable, net
$ 2,620,000.00
15.5%
$ 1,720,000.00
11.7%
Inventory
$ 3,580,000.00
21.2%
$ 2,300,000.00
15.6%
Prepaid expenses
$ 250,000.00
1.5%
$ 190,000.00
1.3%
Total current assets
$ 7,390,000.00
43.8%
$ 5,710,000.00
38.7%
Plant and equipment, net
$ 9,480,000.00
56.2%
$ 9,030,000.00
61.3%
Total assets
$ 16,870,000.00
100.0%
$ 14,740,000.00
100.0%
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities
$ 3,880,000.00
23.0%
$ 2,940,000.00
19.9%
Note payable, 10%
$ 3,660,000.00
21.7%
$ 3,060,000.00
20.8%
Total liabilities
$ 7,540,000.00
44.7%
$ 6,000,000.00
40.7%
Stockholders' equity:
Common stock, $75 par value
$ 7,500,000.00
44.5%
$ 7,500,000.00
50.9%
Retained earnings
$ 1,830,000.00
10.8%
$ 1,240,000.00
8.4%
Total stockholders' equity
$ 9,330,000.00
55.3%
$ 8,740,000.00
59.3%
Total liabilities and stockholders' equity
$ 16,870,000.00
100.0%
$ 14,740,000.00
100.0%
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