Comprehensive Ratio Analysis
Data for Lozano Chip Company and its industry averagesfollow.
Lozano Chip Company: Balance Sheet as of December 31,2016 (Thousands of Dollars)
| Cash | $Â Â 225,000 | | Accounts payable | $601,866 |
| Receivables | 1,575,000 | | Notes payable | 326,634 |
| Inventories | 1,125,000 | | Other current liabilities | 525,000 |
| Â Â Total current assets | $2,925,000 | | Â Â 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 EndedDecember 31, 2016 (Thousands of Dollars)
| Sales | $7,500,000 |
| Cost of goods sold | 6,375,000 |
| Selling general and administrative expenses | 825,000 |
| Â Â Earnings before interest and taxes (EBIT) | $Â Â Â Â 300,000 |
| Interest expense | 111,631 |
| Â Â Earnings before taxes (EBT) | $Â Â Â Â 188,369 |
| Federal and state income taxes (40%) | 75,348 |
| Net income | $Â Â Â Â 113,022 |
- Calculate the indicated ratios for Lozano. Round your answersto two decimal places.
| Ratio | Â Â Â Â Â Â Lozano | Industry Average |
| Current assets/Current liabilities | | 2.0 |
| Days sales outstanding* | 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 | % | 30.0% |
| Total liabilities/Total assets | % | 60.0% |
| *Calculation is based on a 365-day year. |
- Construct the extended Du Pont equation for both Lozano and theindustry. 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 youranalysis
