Comprehensive Ratio Analysis
Data for Lozano Chip Company and its industry averagesfollow.
Lozano Chip Company: Balance Sheet as ofDecember 31, 2019
(Thousands of Dollars) |
| Cash | $ 235,000 | | Accounts payable | $ 600,000 |
| Receivables | 1,575,000 | | Notes payable | 100,000 |
| Inventories | 1,130,000 | | Other current liabilities | 560,000 |
| Total current assets | $2,940,000 | | Total current liabilities | $1,260,000 |
| Net fixed assets | 1,360,000 | | Long-term debt | 400,000 |
| | | Common equity | 2,640,000 |
| Total assets | $4,300,000 | | Total liabilities and equity | $4,300,000 |
Lozano Chip Company: Income Statement forYear Ended December 31, 2019
(Thousands of Dollars) |
| Sales | $7,500,000 |
| Cost of goods sold | 6,375,000 |
| Selling, general, and administrative expenses | 927,000 |
| Earnings before interest and taxes (EBIT) | $ 198,000 |
| Interest expense | 40,000 |
| Earnings before taxes (EBT) | $ 158,000 |
| Federal and state income taxes (25%) | 39,500 |
| Net income | $ 118,500 |
- Calculate the indicated ratios for Lozano. Do not roundintermediate calculations. Round your answers to two decimalplaces.
| 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 bothLozano 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 %.
