Problem 15-15 Comprehensive Ratio Analysis [LO15-2, LO15-3, LO15-4, LO15-5, LO15
ID: 2497047 • Letter: P
Question
Problem 15-15 Comprehensive Ratio Analysis [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6]
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:
rev: 09_17_2014_QC_54324, 12_11_2014_QC_CS-386
References
Section BreakProblem 15-15 Comprehensive Ratio Analysis [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6]
2.
value:
10.00 points
Required information
Part 1
You decide first to assess the company’s performance in terms of debt management and profitability. Compute the following for both this year and last year: (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.)
rev: 09_17_2014_QC_54324
References
WorksheetPart 1
3.
value:
10.00 points
Required information
Part 2
You decide next to assess the company’s stock market performance. Assume that Lydex’s stock price at the end of this year is $106 per share and that at the end of last year it was $74. 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.)
rev: 09_17_2014_QC_54324
References
WorksheetPart 2
4.
value:
10.00 points
Required information
Part 3
You decide, finally, to assess the company’s liquidity and asset management. For both this year and last year, compute: (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)
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
Solution:
Times Interest earned ratio = Earnings before interest and tax / Interest expense This year Last year Earnings before interest and tax 2,170,000 1,917,000 Interest expense 370,000 310,000 Times interest earned ratio 5.86 6.18 Debt Equity ratio = Total Debt / Stockholder's Equity This year Last year Debt 7,770,000 6,200,000 Equity 9,760,000 8,820,000 Debt Equity ratio = 0.80 0.70 Gross Margin Percentage = Gross profit / Sales * 100 Gross profit 3,184,000 3,545,000 Sales 15,920,000 14,180,000 Gross margin ratio 20% 25% Return on assets =Net Income /Average total assets NeT Income 1,260,000 1,124,900 Average total assets = Beginning asset + Ending Assets /2 Beginning assets 15,020,000 13,130,000 Ending Assets 17,530,000 15,020,000 Average total assets = 16,275,000 14,075,000 Return on assets = 7.74% 7.99%