You have just been hired as a financial analyst for Lydex Company, a manufacture
ID: 2453097 • 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 assigment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:
Required information
You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (Round your intermediate calculations and final percentage answers to 1 decimal place. i.e., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final answers to 2 decimal places.)
7.
Required information
You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $76 per share and that at the end of last year it was $44. For both this year and last year, compute: (Round your intermediate calculations and final percentage answers to 1 decimal place. i.e., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final answers to 2 decimal places.)
8.
Required information
You decide, finally, to assess the company’s liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)
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:
Explanation / Answer
1.
(a) Interst earned ration = Net operating income/ interest
Current year = $1560000/$360000
= 4.33
Last year = $1602000/$300000
= 5.34
(b) Debt - equity ratio = Debt/equity
Current year = $3600000/$8780000
= 0.41
Last year = $3000000/$8290000
= 0.36
(c) Gross margin percentage =(Gross profit/ Turnover)*100
Current year =($3154000/$15770000)*100
= 20%
last year =(3170000/12680000)*100
= 25%
(d) return on total assets = Net income/ total assets
Current year = 840000/16300000
= 5.15%
last year =(911400/14090000)*100
= 6.47%
(e) Return on equity = Net profit after tax/Shareholder's fund
Current year =(840000/8780000)*100
= 9.57%
Last year =(911400/8290000)*100
= 11%
(f) Financial leverage = Contribution/EBIT
= 3154000/1560000
= 2.02
Company has a fabourable financial leverage.
2.
(a) EPS = Earnings available for equity shareholders/No. of shares
Current year = $840000/100000
=$8.40
Last year = $911400/100000
= $9.114
(b) Dividend yeild ratio =(Dividend per share/market price per share)*100
Current year =(3.50/76)*100
= 4.61%
last year =(4.557/44)*100
= 10.36%
(c) Divedend payout ratio =(Dividend per share/Earning per share)*100
Current year =(3.50/8.40)*100
= 41.67%
Last year =(4.557/9.114)*100
= 50%
(d) PE ratio = MPS/EPS
Current year = 76/3.50 = 21.71 times
Last year = 44/4.557 = 9.65 times
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