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Problem $16-15($Static$)$ Comprehensive Ratio Analysis $[$LO$16-2,$ LO$16-3,$ LO$16-4,$ LO$16-5,$ LO$16-6]$

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

Lydex Company$$s financial statements for the last two years are as follows:

Lydex Company

Comparative Balance Sheet

This Year Last Year

Assets

Current assets:

Cash $ $960,000$ $ $1,260,000$

Marketable securities $0300,000$

Accounts receivable, net $2,700,0001,800,000$

Inventory $3,900,0002,400,000$

Prepaid expenses $240,000180,000$

Total current assets $7,800,0005,940,000$

Plant and equipment, net $9,300,0008,940,000$

Total assets $ $17,100,000$ $ $14,880,000$

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ $3,900,000$ $ $2,760,000$

Note payable, $10\%3,600,0003,000,000$

Total liabilities $7,500,0005,760,000$

Stockholders' equity:

Common stock, $ $78$ par value $7,800,0007,800,000$

Retained earnings $1,800,0001,320,000$

Total stockholders' equity $9,600,0009,120,000$

Total liabilities and stockholders' equity $ $17,100,000$ $ $14,880,000$

Lydex Company

Comparative Income Statement and Reconciliation

This Year Last Year

Sales $($all on account$)$ $ $15,750,000$ $ $12,480,000$

Cost of goods sold $12,600,0009,900,000$

Gross margin $3,150,0002,580,000$

Selling and administrative expenses $1,590,0001,560,000$

Net operating income $1,560,0001,020,000$

Interest expense $360,000300,000$

Net income before taxes $1,200,000720,000$

Income taxes $(30\%)360,000216,000$

Net income $840,000504,000$

Common dividends $360,000252,000$

Net income retained $480,000252,000$

Beginning retained earnings $1,320,0001,068,000$

Ending retained earnings $ $1,800,000$ $ $1,320,000$

The following financial data and ratios are typical of companies in Lydex Company$$s industry:

Current ratio $2\mathrm{.}3$

Acid$-$test ratio $1\mathrm{.}2$

Average collection period $30$ days

Average sale period $60$ days

Return on assets $9\mathrm{.}5\%$

Debt$-$to$-$equity ratio $0\mathrm{.}65$

Times interest earned ratio $5\mathrm{.}7$

Price$-$earnings ratio $10$

Problem $16-15$ Part $3($Static$)$

$3.$ To assess the company$$s liquidity and asset management, compute the following for this year and last year:

Working capital.

The current ratio.

Note: Round your final answers to $2$ decimal places.

The acid$-$test ratio.

Note: Round your final answers to $2$ decimal places.

The average collection period. $($The accounts receivable at the beginning of last year totaled $$1,560,000.)$

Note: Use $365$ days in a year. Round your intermediate calculations and final answers to $1$ decimal place.

The average sale period. $($The inventory at the beginning of last year totaled $$1,920,000.)$

Note: Use $365$ days in a year. Round your intermediate calculations and final answers to $1$ decimal place.

The operating cycle.

Note: Round your intermediate calculations and final answers to $1$ decimal place.

The total asset turnover. $($The total assets at the beginning of last year totaled $$12,960,000.)$

Note: Round your final answers to $2$ decimal places.$\backslash$table$[[,$This Year,Last Year$],[$a$.$ Working capital,,,,$],[$b$.$ The current ratio,,,,$],[$c$.$ The acid$-$test ratio,,,,$],[$d$.$ The average collection period,,days,,days$],[$e$.$ The average sale period,,days,,days$],[$f$.$ The operating cycle,,days,,days$],[$g$.$ The total asset turnover,,,,$]]$

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