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Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 3 1 , 2
Comprehensive Ratio Analysis
Data for Lozano Chip Company and its industry averages follow.
Lozano Chip Company: Balance Sheet as of December
Thousands of Dollars
Cash $ Accounts payable $
Receivables Notes payable
Inventories Other current liabilities
Total current assets $ Total current liabilities $
Net fixed assets Longterm debt
Common equity
Total assets $ Total liabilities and equity $
Lozano Chip Company: Income Statement for Year Ended December
Thousands of Dollars
Sales $
Cost of goods sold
Selling, general, and administrative expenses
Earnings before interest and taxes EBIT $
Interest expense
Earnings before taxes EBT $
Federal and state income taxes
Net income $
Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers to two decimal places.
Ratio Lozano Industry Average
Current assetsCurrent liabilities
Days sales outstanding day year
days days
COGSInventory
SalesFixed assets
SalesTotal assets
Net incomeSales
Net incomeTotal assets
Net incomeCommon equity
Total debtTotal assets
Total liabilitiesTotal assets
Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Round your answers to two decimal places.
For the firm, ROE is
For the industry, ROE is
Outline Lozano's strengths and weaknesses as revealed by your analysis.
The firm's days sales outstanding is more than twice as long as the industry average, indicating that the firm should
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credit or enforce a
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stringent collection policy.
The total assets turnover ratio is well
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the industry average so sales should be
Select
assets
Select
or both.
While the company's profit margin is
Select
than the industry average, its other profitability ratios are
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compared to the industry net income should be
Select
given the amount of equity and assets.
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