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 $ 230,000 Accounts payable $ 600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,160,000 Other current liabilities 525,000 Total current assets $2,965,000 Total current liabilities $1,225,000 Net fixed assets 1,350,000 Long-term debt 400,000 Common equity 2,690,000 Total assets $4,315,000 Total liabilities and equity $4,315,000 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 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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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	$ 230,000	Accounts payable	$ 600,000
Receivables	1,575,000	Notes payable	100,000
Inventories	1,160,000	Other current liabilities	525,000
Total current assets	$2,965,000	Total current liabilities	$1,225,000
Net fixed assets	1,350,000	Long-term debt	400,000
		Common equity	2,690,000
Total assets	$4,315,000	Total liabilities and equity	$4,315,000

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

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 %.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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