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:

       To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry:

References

Section BreakProblem 13-15A Comprehensive Ratio Analysis [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]

1.

Required information

Part 1

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.)

2.

Required information

Part 2

You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $94 per share and that at the end of last year it was $62. 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%.)

  3.

Required information

Part 3

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.)

[The following information applies to the questions displayed below.]

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

Financial leverage is positive as the return to equity holders is greater than the interest payable to the creditors.

Ratios Formula this year last year Calculation Value Calculation Value Times interest earned ratio Net Operating profit / interest 2166000/366000 5.92 1791000/306000 5.85 The debt to equity ratio Total liabilities/total equity 7670000/9370000 0.82 6040000/8510000 0.71 The gross margin percentage Gross profit/net sales 3172000/15860000 0.20 3395000/13580000 0.25 The return on total assets. Net Income / Average total Assets 1260000/((17040000+14550000)/2) 0.08 1039500/((14550000+13070000)/2) 0.08 The return on equity Net Income/Average Stcok holders' equity 1260000/((9370000+8510000)/2) 0.14 1039500/((8510000+7990250)/2) 0.13

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