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8) Comprehensive Ratio Analysis

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	1,130,000		Other current liabilities	535,000
Total current assets	$2,930,000		Total current liabilities	$1,235,000
Net fixed assets	1,340,000		Long-term debt	400,000
			Common equity	2,635,000
Total assets	$4,270,000		Total liabilities and equity	$4,270,000

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	923,000
Earnings before interest and taxes (EBIT)	$ 202,000
Interest expense	40,000
Earnings before taxes (EBT)	$ 162,000
Federal and state income taxes (25%)	40,500
Net income	$ 121,500

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

Ratio	Lozano	Industry Average
Current assets/Current liabilities		2.0
Days sales outstanding (365-day year)	days	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	%	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 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 19compared to the industry - net income should be -Select-higherlowerItem 20 given the amount of equity and assets.

9) Required Annuity Payments

Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $45,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: Your father realizes that if inflation occurs the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 3% per year from today forward. He currently has $25,000 saved and expects to earn a return on his savings of 9% per year with annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.) Do not round intermediate calculations. Round your answer to the nearest dollar.