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: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 870,000 $ 1,110,000 300,000 1,440,000 2,100,000 180,000 0 2,340,000 3,510,000 240,000 6,960,000 9,340,000 5,130,000 8,960,000 otal current assets Plant and equipment, net otal assets $16,300,000 $14,090,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% $ 3,920,000 3,600,000 $ 2,800,000 3,000,000 Total liabilities 7,520,00O 5,800,000 Stockholders' equity: Common stock, $70 par value Retained earnings 7,000,000 1,780,000 7,000,000 1,290,0000 Total stockholders' equity 8,780,000 8,290,000 Total liabilities and stockholders' equity $16,300,000 $14,090,000

Explanation / Answer

Question - 1 D) The Return on total assets Formula for above ration = Return / Total Assets *100 Particulars This Year Last Year Net Income 840000 911400 Closing Total Assets 16300000 14090000 Return on Total assets 5.15% 6.47% e) The Return on equity Formula for Return on equity = Total Return / Total Equity Particulars This Year Last Year Net Income 840000 911400 Total Equity 8780000 8290000 Return on Equity 9.6% 11.0% Question -2 a) Earnings Per Share Formula = Earnings Attributable to the equity share holders / No of Shares Particulars This Year Last Year Earnings Attributable to the equity share holders 840000 911400 No of Shares 700000 700000 (7000000/ 70 par value) Earnings Per share 1.2 1.302 b) Dividend Yield Ratio Formula = Cash Dividend Per share / Market Price Per share Particulars This Year Last Year Dividends Paid 350000 455700 No of Shares 700000 700000 (7000000/ 70 par value) Dividend Per share 0.5 0.651 Market Price Per share 76 44 Dividend Yield Ration 0.66% 1.48% c) Dividend Payout Ratio Formula = Dividend Paid / Net Earnings Particulars This Year Last Year Dividends Paid 350000 455700 Net Earnings 840000 911400 Dividend Payout Ratio 41.67% 50.00% d) Price Earnings Ratio Formula = Market Price / Earnings Per share Particulars This Year Last Year Market Price 76 44 Earnings Per share 1.2 1.302 Price Earnings Ratio 63.33 33.79 e) Book Value per share of common stock Particulars This Year Last Year Total Share Holders Equity 8780000 8290000 No of Shares 700000 700000 (7000000/ 70 par value) Book Value per share 12.54 11.84

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