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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
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 companyAc€?cs financial statements, including comparing LydexAc€?cs performance to its major competitors. The companyAc€?cs financial statements for the last two years are as follows: |
Lydex Company Comparative Balance Sheet |
||||
 | This Year | Last Year | ||
  Assets |  |  |  |  |
  Current assets: |  |  |  |  |
     Cash | $ | 890,000    | $ | 1,130,000    |
     Marketable securities |  | 0    |  | 300,000    |
     Accounts receivable, net |  | 2,420,000    |  | 1,520,000    |
     Inventory |  | 3,530,000 |  | 2,300,000    |
     Prepaid expenses |  | 240,000    |  | 180,000    |
 |  |  |  |  |
  Total current assets |  | 7,080,000    |  | 5,430,000    |
  Plant and equipment, net |  | 9,380,000    |  | 8,980,000    |
 |  |  |  |  |
  Total assets | $ | 16,460,000    | $ | 14,410,000    |
 |  |  |  |  |
Liabilities and Stockholders' Equity | Â | Â | Â | Â |
  Liabilities: |  |  |  |  |
     Current liabilities | $ | 3,940,000    | $ | 2,840,000    |
     Note payable, 10% |  | 3,620,000    |  | 3,020,000    |
 |  |  |  |  |
  Total liabilities |  | 7,560,000    |  | 5,860,000    |
 |  |  |  |  |
  Stockholders' equity: |  |  |  |  |
      Common stock, $70 par value |  | 7,000,000    |  | 7,000,000    |
      Retained earnings |  | 1,900,000    |  | 1,550,000    |
 |  |  |  |  |
  Total stockholders' equity |  | 8,900,000    |  | 8,550,000    |
 |  |  |  |  |
  Total liabilities and stockholders' equity | $ | 16,460,000    | $ | 14,410,000    |
 |  |  |  |  |
 |
Lydex Company Comparative Income Statement and Reconciliation |
||||
 | This Year | Last Year | ||
  Sales (all on account) | $ | 15,790,000   | $ | 12,880,000   |
  Cost of goods sold |  | 12,632,000   |  | 9,660,000   |
 |  |  |  |  |
  Gross margin |  | 3,158,000   |  | 3,220,000   |
  Selling and administrative expenses |  | 1,796,000   |  | 1,576,000   |
 |  |  |  |  |
  Net operating income |  | 1,362,000   |  | 1,644,000   |
  Interest expense |  | 362,000   |  | 302,000   |
 |  |  |  |  |
  Net income before taxes |  | 1,000,000   |  | 1,342,000   |
  Income taxes (30%) |  | 300,000   |  | 402,600   |
 |  |  |  |  |
  Net income |  | 700,000   |  | 939,400   |
  Common dividends |  | 350,000   |  | 469,700   |
 |  |  |  |  |
  Net income retained |  | 350,000   |  | 469,700  |
  Beginning retained earnings |  | 1,550,000   |  | 1,080,300   |
 |  |  |  |  |
  Ending retained earnings | $ | 1,900,000   | $ | 1,550,000   |
 |  |  |  |  |
 |
       To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex CompanyAc€?cs industry: |
 |  |  | |||||||||||||||||||||||||||||||||||||||||||
  Current ratio | 2.3 |   | |||||||||||||||||||||||||||||||||||||||||||
  Acid-test ratio | 1.0 |   | |||||||||||||||||||||||||||||||||||||||||||
  Average collection period | 40 | days     | |||||||||||||||||||||||||||||||||||||||||||
  Average sale period | 60 | days     | |||||||||||||||||||||||||||||||||||||||||||
  Return on assets | 8.5 | %          | |||||||||||||||||||||||||||||||||||||||||||
  Debt-to-equity ratio | .69 |  | |||||||||||||||||||||||||||||||||||||||||||
  Times interest earned ratio | 5.8 |  | |||||||||||||||||||||||||||||||||||||||||||
  Price-earnings ratio | 10 |  | |||||||||||||||||||||||||||||||||||||||||||
|
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