Please help as soon as possible You have just been hired as a financial analyst

Question

Please help as soon as possible

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 comprenensive anaysis of the company's financial statements, including comparing Lydex's performance to its major competitors. The company's finançai statements for tie 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: 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 $1,630,000.) The average sale period. (The inventory at the beginning of last year totaled $1,990,000.) The operating cycle. The total asset turnover. (The total assets at the beginning of last year totaled $13,030,000.)

Explanation / Answer

a)

Working Capital = Current Assets- Current Liabilities

Last Year:$5,390,000-$2,900,000=$2,490,000

This year:$7,270,000-$3,970,000=$3,300,000

b)

Current Ratio= Current Assets/Current Liabilities

Last Year:$5,390,000/$2,900,000=1.86

This year:$7,270,000/$3,970,000=1.83

--------------------------------------------------------------------------------------------------------------------------

c)

Acid test Ratio= (Current Assets-inventory – Prepaid expenses)/Current Liabilities

Last Year:($5,390,000-$2,100,000-$190,000)/$2,900,000=1.07

This year:($7,270,000$-$3,560,000-$250,000)/$3,970,000=0.87

d)

Average Collection Period= 365/ Receivable Turnover

Last Year:365/8.06=45.28 days

This year:365/7.57=48.22 days

Receivable Turnover = Net Credit sales/ Avg Receivables

Last Year:$13,180,000/$1,635,000=8.06

This year:$15,820,000/=$2,090,000=7.57

               

Avg Receivables = Beginning Receivables + Ending Receivables/2

Last Year:$1,630,000+$1,640,000/2=$1,635,000

This year:$1,640,000+$2,540,000/2=$2,090,000

e)

Average Sales Period =365/ Inventory Turnover

Last Year:365/4.83=75.57 days

This year:365/=4.72=77.33 days

Inventory Turnover=Cost of Goods sold/ Avg Inventory

Last Year:$9,885,000/$2,045,000=4.83

This year:$12,656,000/$2,830,000=4.47

Average Inventory =Beginning Inventory+ Ending Turnover/2

Last Year:$1,990,000+$2,100,000/2=$2,045,000

This year:$2,100,000+$3,560,000/2=$2,830,000

f)

Operating Cycle= Days Inventory Outstanding (DIO) + Days Sales Outstanding(DSO) – Days Payable Outstanding(DPO)

Last Year:77.54+45.42-107.08=15.88 days

This year:102.67+73.25-114.50=61.42 days

Days Inventory Outstanding (DIO)=365 x Ending Inventory/ Cost of Goods Sold     

Last Year:365 x $2,100,000/$9,885,000=77.54 days

This year:365 x $3,560,000/$12,656,000=102.67 days

Days Sales Outstanding(DSO)= =365 X Ending Accounts Receivable/ Net Credit Sales

Last Year:365 x $1,640,000/$13,180,000=45.42 days

This year:365 x $ 2,540,000/$12,656,000=73.25 days

Days Payable Outstanding(DPO)=365 x Ending Accounts Payable/ Cost of Goods sold

Last Year:365 x $2,900,000/$9,885,000=107.08

This year:365 x $3,970,000/$12,656,000=114.50

g.The Total Assets Turnover= Sales / Total Assets

   Last Year:$13,180,000/$14,400,000=0.91

   This year:$15,820,000/$16,710,000=0.95

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.