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 $ 1,000,000 $ 1,240,000 300,000 1,960,000 2,400,000 210,000 0 2,860,000 3,640,000 270,000 Total current assets Plant and equipment, net 7,770,000 9,600,000 6,110,000 9,090,000 Total assets $17,370,000 $15,200,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% $ 4,050,000 3,700,000 $ 3,060,000 3,100,000 Total liabilities 7,750,000 6,160,000 Stockholders' equity: Common stock, $75 par value Retained earnings 7500,000 2,120,000 7500,000 1,540,000 Total stockholders' equity 9,620,000 9,040,000 Total liabilities and stockholders' equity $17,370,000 $15,200,000

Explanation / Answer

a)Earning per share =Net Income - Preferred Dividends / Common Shares Outstanding

Current Year

=$980,000- NIL /100,000(7,500,000/$75)

=$9.8 per share

Last year

=$1,095,500 -Nil / 100,000(7,500,000/$75)

=$10.95

_______________________________________________________________

b) dividend Yield ratio

=Dividend per share / year end market share price

Current year

=$9.8 per share /$102

=0.09 *100 =9%

Last year

=10.95 / $70

=0.16 *100=16%

____________________________________________________

c) Dividends pay out ratio:

=Total dividends / Net Income

Current year

=$400,000 /$980,000

=0.41 *100

=41%

Last year:

=$547,750 / $1,095,500

=0.50*100

=50%

___________________________________________________________-

d) Price Earning Ratio = Market price per share / Earning per share

Current year

=$102 /$9.8

=$10.41

Last year

=$70 / $10.95

=$6.39

____________________________________________________________________

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

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