Data for Lozano Chip Company and its industry averages follow.

a. Calculate the indicated ratios for Lozano.

b. Construct the extended Du Pont equation for both Lozano and the industry.

c. Outline Lozanos strengths and weaknesses as revealed by your analysis.

Lozano Chip Company: Balance Sheet as of December 31, 2013 (Thousands

of Dollars)

Cash $ 225,000 Accounts payable $ 601,866

Receivables 1,575,000 Notes payable 326,634

Inventories 1,125,000 Other current liabilities 525,000

Total current assets $2,950,000 Total current liabilities $1,453,500

Net fixed assets 1,350,000 Long-term debt 1,068,750

__________ Common equity 1,752,750

Total assets $4,275,000 Total liabilities and equity $4,275,000

Lozano Chip Company: Income Statement for Year Ended December 31, 2013

(Thousands of Dollars)

Sales $ 7,500,000

Cost of goods sold 6,375,000

Selling, general, and administrative expenses 825,000

Earnings before interest and taxes (EBIT) $ 300,000

Interest expense 111,631

Earnings before taxes (EBT) $ 188,369

Federal and state income taxes (40%) 75,348

Net income $ 113,022

Ratio Lozano Industry Average

Current assets/Current liabilities __________ 2.0

Days sales outstanding (365-day year) __________ 35.0 days

COGS/Inventory __________ 6.7

Sales/Fixed assets __________ 12.1

Sales/Total assets __________ 3.0

Net income/Sales __________ 1.2%

Net income/Total assets __________ 3.6%

Net income/Common equity __________ 9.0%

Total debt/Total assets __________ 30.0%

Total liabilities/Total assets __________ 60.0%