You have just been hired as a financial analyst for Lydex Company, a manufacture

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: You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $84 per share and that at the end of last year it was $52. For both this year and last year, compute: (Round your intermediate calculations and final answers to 2 decimal places. For percentages 0.1234 should be considered as 12.34%.) The earnings per share. The dividend yield ratio. The dividend payout ratio. The price-earnings ratio. The book value per share of common stock. To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 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.) The times interest earned ratio. The debt-to-equity ratio. The gross margin percentage. The return on total assets. (Total assets at the beginning of last year were $13,020,000.) The return on equity. (Stockholders' equity at the beginning of last year totaled $7,836,300. There has been no change in common stock over the last two years.) Is the company's financial leverage positive or negative? 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.) Working capital. The current ratio. The acid-test ratio. The average collection period. (The accounts receivable at the beginning of last year totaled $1,620,000.) The average sale period. (The inventory at the beginning of last year totaled $1,980,000.) The operating cycle. The total asset turnover. (The total assets at the beginning of last year totaled $13,020,000.)

Explanation / Answer

Question 1 This year Last Year Net Income $      710,000.00 $      483,700.00 No of Shares 100000 100000 a. Earnings per share $                   7.10 $                   4.84 Market price per share $                84.00 $                52.00 Common dividend $      340,000.00 $      483,700.00 Dividend per share $                   3.40 $                   4.84 b. Dividend yield (dividend per share/Market price per share) 4.05% 9.30% c. Dividend payout ratio (Dividend/Net Income) 47.89% 100.00% d.Price earnings ratio (Market price per share/Earnings per share) 11.83 10.75 Shareholders Equity $ 9,030,000.00 $ 8,320,000.00 e. Book value per share (Shareholders equity / No of Shares) $                90.30 $                83.20 Question 2. a. Times interest ratio (Net Operating Income/interest) 5.12 5.55 b. Debt to equity Ratio(Long term debt/shareholders equity) 0.40 0.37 C.Gross Margin % (Gross Income/Sales) 20.00% 25.00% d. Return on total assets (Net Income after tax /Total Assets) 6.31% 6.79% e. Return on equity (Net Income Retained/Shareholders Equity) 7.86% 5.81%

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