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:

You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $90 per share and that at the end of last year it was $58. For both this year and last year, compute: (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.)

Lydex Company
Comparative Balance Sheet This Year Last Year   Assets   Current assets:      Cash $ 940,000     $ 1,180,000          Marketable securities 0     300,000          Accounts receivable, net 2,620,000     1,720,000          Inventory 3,580,000 2,300,000          Prepaid expenses 250,000     190,000       Total current assets 7,390,000     5,690,000       Plant and equipment, net 9,480,000     9,030,000       Total assets $ 16,870,000     $ 14,720,000     Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 3,990,000     $ 2,940,000          Note payable, 10% 3,660,000     3,060,000       Total liabilities 7,650,000     6,000,000       Stockholders' equity:       Common stock, $75 par value 7,500,000     7,500,000           Retained earnings 1,720,000     1,220,000       Total stockholders' equity 9,220,000     8,720,000       Total liabilities and stockholders' equity $ 16,870,000     $ 14,720,000    

Explanation / Answer

Formula This year Last year a. Earnings per share Net income / No. of shares of common stock outstanding $ 8.40 $ 10.10 b. Dividend yield ratio Dividend per share / Market price per share 3.78% 8.71% c. Dividend payout ratio Dividend per share / Earnings per share 40.48% 50% d. Price earnings ratio Market price per share / Earnings per share 10.71 5.74 e. Book value per share of common stock Stockholders' Equity / No. of shares of common stock outstanding $ 92.20 $ 87.20

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