Data for Lozano Chip Company and its industry averages follow.

Lozano Chip Company: Balance Sheet as of December 31, 2021 (Thousands of Dollars)Cash$230,000Accounts payable$600,000Receivables1,575,000Notes payable100,000Inventories1,115,000Other current liabilities550,000Total current assets$2,920,000Total current liabilities$1,250,000Net fixed assets1,355,000Long-term debt400,000Common equity2,625,000Total assets$4,275,000Total liabilities and equity$4,275,000

Lozano Chip Company: Income Statement for Year Ended December 31, 2021 (Thousands of Dollars)Sales$7,500,000Cost of goods sold6,375,000Selling, general, and administrative expenses923,000Earnings before interest and taxes (EBIT)$202,000Interest expense40,000Earnings before taxes (EBT)$162,000Federal and state income taxes (25%)40,500Net income$121,500

1. Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers to two decimal places.

RatioLozanoIndustry AverageCurrent assets/Current liabilities2.0Days sales outstanding (365-day year)days35.0daysCOGS/Inventory6.7Sales/Fixed assets12.1Sales/Total assets3.0Net income/Sales%1.2%Net income/Total assets%3.6%Net income/Common equity%9.0%Total debt/Total assets%10.0%Total liabilities/Total assets%60.0%

1. 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 -Select-slackentightenItem 13 credit or enforce a -Select-morelessItem 14 stringent collection policy.

The total assets turnover ratio is well -Select-abovebelowItem 15 the industry average so sales should be -Select-decreasedincreasedItem 16 , assets -Select-decreasedincreasedItem 17 , or both.

While the company's profit margin is -Select-higherlowerItem 18 than the industry average, its other profitability ratios are -Select-highlowItem 19 compared to the industry - net income should be -Select-higherlowerItem 20 given the amount of equity and assets.