Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 225,000 Accounts payable $ 600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,145,000 Other current liabilities 540,000 Total current assets $2,945,000 Total current liabilities $1,240,000 Net fixed assets 1,315,000 Long-term debt 400,000 Common equity 2,620,000 Total assets $4,260,000 Total liabilities and equity $4,260,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands of Dollars) Sales $7,500,000 Cost of goods sold 6,375,000 Selling, general, and administrative expenses 931,000 Earnings before interest and taxes (EBIT) $ 194,000 Interest expense 40,000 Earnings before taxes (EBT) $ 154,000 Federal and state income taxes (25%) 38,500 Net income 115,500 a. Calculate the indicated ratios for Lozano. Do not round Intermediate calculations. Round your answers to two decimal place Ratio Lozano Industry Average 2.0 Current assets/Current liabilities Days sales outstanding (365-day year) days 35.0 days COGS/Inventory 12.1 Sales/Fixed assets Sales/Total assets Net Income/Sales 6.7 3.0 1.27 % Net 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% Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Round you answers to two decimal places. For the firm, ROE is %. For the industry, ROE is %. E. 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 credit or enforce a -Select-stringent collection policy. The total assets turnover ratio is well -Select the industry average so sales should be -Select- assets -Select- both. While the company's profit margin is-Select than the industry average, its other profitability ratios are Select compared to the Industry - net income should be -Select- given the amount of equity and assets. OF Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 225,000 Accounts payable $ 600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,145,000 Other current liabilities 540,000 Total current assets $2,945,000 Total current liabilities $1,240,000 Net fixed assets 1,315,000 Long-term debt 400,000 Common equity 2,620,000 Total assets $4,260,000 Total liabilities and equity $4,260,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands of Dollars) Sales $7,500,000 Cost of goods sold 6,375,000 Selling, general, and administrative expenses 931,000 Earnings before interest and taxes (EBIT) $ 194,000 Interest expense 40,000 Earnings before taxes (EBT) $ 154,000 Federal and state income taxes (25%) 38,500 Net income 115,500 a. Calculate the indicated ratios for Lozano. Do not round Intermediate calculations. Round your answers to two decimal place Ratio Lozano Industry Average 2.0 Current assets/Current liabilities Days sales outstanding (365-day year) days 35.0 days COGS/Inventory 12.1 Sales/Fixed assets Sales/Total assets Net Income/Sales 6.7 3.0 1.27 % Net 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% Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Round you answers to two decimal places. For the firm, ROE is %. For the industry, ROE is %. E. 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 credit or enforce a -Select-stringent collection policy. The total assets turnover ratio is well -Select the industry average so sales should be -Select- assets -Select- both. While the company's profit margin is-Select than the industry average, its other profitability ratios are Select compared to the Industry - net income should be -Select- given the amount of equity and assets. OF
