Problem 13-15A Comprehensive Ratio Analysis [LO13-2, LO13-3, LO13-4, LO13-5, LO1

Question

Problem 13-15A Comprehensive Ratio Analysis [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]

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:

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.)

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 $92 per share and that at the end of last year it was $60. For both this year and last year, compute: (Round your intermediate calculations and final answers to 2 decimal places. For percentages 0.1234 should be considered as 12.34%.)

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 "days" intermediate calculations and final answers to 1 decimal place. Round all other intermediate calculations and final answers to 2 decimal places.)

The total asset turnover. (The total assets at the beginning of last year totaled $13,060,000.)

[The following information applies to the questions displayed below.]

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

More than 1 hance it is positive

Part 2

Answar -Part 1 This Year Last Year a. The times interest earned ratio.               4.05               5.78 b. The debt-to-equity ratio.               0.39               0.34 c. The gross margin percentage.             20.00             25.00 d. The return on total assets.               9.85             13.55 e. The return on equity.               8.68             12.26 f. Is the company’s financial leverage positive or negative? Positive Positive Working part 1 a EBIT devided by Interest        4.00546        5.78431 Net income before Interest and taxes 1466000 1770000 Interest expense 366000 306000 b Long term debt devided by Equity fund 0.39355        0.34498 Note payable, 10%(Long term debt) 3660000 3060000 Total stockholders' equity 9300000 8870000 Gross Margin 0.2 0.25 c Gross Margin devided by Sales 3170000 3370000 Sales 15850000 13480000 D Return on total Assets EBIT Devided by Net Assets 0.09845534 0.13552833 Net income before Interest and taxes(EBIT) 1466000 1770000 Net Assets at beginning of the year 14,890,000 13,060,000 Note -Some time average debt can also be taken in that case you have to take average of opening and closing balance. E Return On equity Net profit after tax devided by Equity Fund 0.08680947 0.12261893 Net Income(PAT) 770000 1024800 Equity Fund at the beginning of the year 8870000 8357600 F Financial Levrage(EBIT devided by EBT) 1.33272727 1.20901639 EBIT 1466000 1770000 EBT 1,100,000 1,464,000

More than 1 hance it is positive

Part 2

a The earnings per share. 7.7 10.25 b. The dividend yield ratio. 0.04 0.09 c. The dividend payout ratio. 44 50 d. The price-earnings ratio. 11.95 5.85 e. The book value per share of common stock. 93 88.7 a Earning devided by No of Shares 7.70 10.248 Net income (Earning) 770000 1024800 Common stock, 70 par value 7000000 7000000 Per Value of Share 70 70 No Of Share 100000 100000 B Dividend per share devided by Marker price per share Dividend 340000 512400 No Of Share 100000 100000 Dividend per share 3.4 5.124 Market Price per Share 92 60 The dividend yield ratio. 0.03695652 0.0854 C The dividend payout ratio. Net income (Earning) 770000 1024800 Dividend 340000 512400 Dividend/ Net Income 0.44155844 0.5 d Price earning ratio 11.9480519 5.85480094 MPS/EPS Earning per share (EPS) 7.7 10.248 Market Price per Share(MPS) 92 60 E Book value per Share 93 88.7 Total Share fund or Net Assets 9300000 8870000 No Of Share 100000 100000

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