Question 43: You have just been hired as a financial analyst for Lydex Company,

Question

Question 43: 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:

Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Question 43: 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

Comparative Income Statement and Reconciliation This Year Last Year This Year Last Year Sales (all on account) 1,58,30,000 1,32,80,000 100.0% 100.0% Cost of goods sold 1,26,64,000 99,60,000 80.0% 75.0% Gross margin 31,66,000 33,20,000 20.0% 25.0% Selling and administrative expenses 14,02,000 15,92,000 8.9% 12.0% Net operating income 17,64,000 17,28,000 11.1% 13.0% Interest expense 3,64,000 3,04,000 2.3% 2.3% Net income before taxes 14,00,000 14,24,000 8.8% 10.7% Income taxes (30%) 4,20,000 4,27,200 2.7% 3.2% Net income 9,80,000 9,96,800 6.2% 7.5% Common dividends 4,10,000 4,98,400 2.6% 3.8% Net income retained 5,70,000 4,98,400 3.6% 3.8% Beginning retained earnings 16,00,000 11,01,600 10.1% 8.3% Ending retained earnings 21,70,000 16,00,000 13.7% 12.0% Comparative Balance Sheet This Year Last Year This Year Last Year Assets Current assets:      Cash 9,30,000 11,70,000 5.5% 8.0%      Marketable securities 0 3,00,000 0.0% 2.1%      Accounts receivable, net 25,80,000 16,80,000 15.4% 11.5%      Inventory 35,70,000 22,00,000 21.3% 15.1%      Prepaid expenses 2,50,000 1,90,000 1.5% 1.3% Total current assets 73,30,000 55,40,000 43.7% 38.0% Plant and equipment, net 94,60,000 90,20,000 56.3% 62.0% Total assets 1,67,90,000 1,45,60,000 100.0% 100.0% Liabilities and Stockholders' Equity Liabilities:      Current liabilities 39,80,000 29,20,000 23.7% 20.1%      Note payable, 10% 36,40,000 30,40,000 21.7% 20.9% Total liabilities 76,20,000 59,60,000 45.4% 40.9% Stockholders' equity:       Common stock, $70 par value 70,00,000 70,00,000 41.7% 48.1%       Retained earnings 21,70,000 16,00,000 12.9% 11.0% Total stockholders' equity 91,70,000 86,00,000 54.6% 59.1% Total Liabilites & Equities 1,67,90,000 1,45,60,000 100.0% 100.0%

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