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: Lydex Company Comparative Balance Sheet This YearLast Year Assets Current assets: Cash Marketable securities Accounts receivable, net $970,0001,210,000 300,000 1,840,000 2,100,000 200,000 0 2,740,000 3,610,000 260,000 Inventory Prepaid expenses 7,580,000 9,540,000 5,650,000 9,060,000 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity $17,120,000 $14,710,000 Liabilities Current liabilities Note payable, 10% $ 4,020,000 3,680,000 S 3,000,000 3,080,000 Total liabilities 7,700,000 6,080,000 Stockholders' equity Common stock, $70 par value Retained earnings 7,000,000 2,420,000 7,000,000 1,630,000 8,630,000 $ 17.120,000 $14,710,000 Total stockholders' equity 9,420,000 Total liabilities and stockholders' equity

Explanation / Answer

Common size income statement

Common size balance sheet

Particulars This year% Last Year% Sales 100 100 Cost of goods sold 80 75 Gross Margin 20 25 Selling & admn exp 6.97 11.75 Net operating income 13.03 13.25 Interest 2.32 13.25 Net income before tax 10.71 10.99 Income tax 3.21 3.30 Net income 7.50 7.69

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