You have just been hired as a Snancial analyst for Lydex Company, a manufacturer
ID: 2479801 • Letter: Y
Question
You have just been hired as a Snancial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perfom a comprehensive analysis of the compamy's financial statements, including comparing Lydex's perfoemance to ins major competeors. The company's financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet This Year Last Year Asse Assets 0003000 Cumem assets: Cashisecunties Accounts receivable, net Prepaid expenses s 1,000000 1240000 2.860000 1960000 3640000 2400000 3640000160000 210.000 270.000 Total current assets Plant and equipment, net 6,110.000 Total assets $ 17,370.000 5200000 Liabilities and Stockholders' Equity Liabiities Current liabines Note payable, 10% s 4050000 300000 3,100000 Total Sabilities 7750.000 6160000 Stockholders' equity Common stock, $75 par value Retained earnings 1,540000 Total stockholders' equity 9.620.000 9040.000 Total Sabilities and stockholders equity $17,370,000 5.200000 Lydex Company This Year Last Year $ 15,900.000 13,980,000 Sales (all on account Cost of goods sold 12,720,000 0485,000 Gross margin Seling and administrative expenses 3180.000 3495,000 1,410000 1,620,000 Net operating income eterest expense 1770,000 370,000 1875,000 565,000 Net income before taxes Income taxes (30%) 1400,000 Net income Common dvidends 1095,500 547750 400,000 Net income retained Beginning retained earnings 580000 547750 Ending retained earnings s 2120000 1540.000Explanation / Answer
a) Time Interest earned ratio= Income before Interest and taxes / Interest Expense
This year
=$1,770,000 /$370,000
=4.78
Last year:
=$1,875,000 / $310,000
=6.05
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b) Debt to equity Ratio =Total Liabilities / Total Equity
This year
=$7750,000 /$9,620,000
=0.80
Last year:
$6,160,000/$9,040,000
=0.68
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C) Gross margin percentage =Gross margin / Net Sales
This year
=$3,180,000 /$15,900,000 *100
=20%
Last year:
$3,495,000 / $13,980,000 *100
=25%
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E) Return on Equity = Net Income / Share holder's Equity
This year:
$980,000 /$9,620,000 *100
=10.18%
Last year:
$1,095,500 /$9,040,000 *100
=12.12%
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