Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 240,000 Accounts payable $ 600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,135,000 Other current liabilities 560,000 Total current assets $2,950,000 Total current liabilities $1,260,000 Net fixed assets 1,315,000 Long-term debt 400,000 Common equity 2,605,000 Total assets $4,265,000 Total liabilities and equity $4,265,000 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 943,000 Earnings before interest and taxes (EBIT) $ 182,000 Interest expense 40,000 Earnings before taxes (EBT) $ 142,000 Federal and state income taxes (25%) 35,500 Net income $ 106,500 Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers to two decimal places.
Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 240,000 Accounts payable $ 600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,135,000 Other current liabilities 560,000 Total current assets $2,950,000 Total current liabilities $1,260,000 Net fixed assets 1,315,000 Long-term debt 400,000 Common equity 2,605,000 Total assets $4,265,000 Total liabilities and equity $4,265,000 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 943,000 Earnings before interest and taxes (EBIT) $ 182,000 Interest expense 40,000 Earnings before taxes (EBT) $ 142,000 Federal and state income taxes (25%) 35,500 Net income $ 106,500 Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers to two decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Comprehensive Ratio Analysis
Data for Lozano Chip Company and its industry averages follow.
| Lozano Chip Company: (Thousands of Dollars) |
||||
| Cash | $ 240,000 | Accounts payable | $ 600,000 | |
| Receivables | 1,575,000 | Notes payable | 100,000 | |
| Inventories | 1,135,000 | Other current liabilities | 560,000 | |
| Total current assets | $2,950,000 | Total current liabilities | $1,260,000 | |
| Net fixed assets | 1,315,000 | Long-term debt | 400,000 | |
| Common equity | 2,605,000 | |||
| Total assets | $4,265,000 | Total liabilities and equity | $4,265,000 |
| 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 | 943,000 |
| Earnings before interest and taxes (EBIT) | $ 182,000 |
| Interest expense | 40,000 |
| Earnings before taxes (EBT) | $ 142,000 |
| Federal and state income taxes (25%) | 35,500 |
| Net income | $ 106,500 |
- Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers to two decimal places.
Transcribed Image Text:Ratio
Lozano
Industry Average
Current assets/Current liabilities
2.0
2.34
Days sales outstanding (365-day year)
35.0 days
76.65
days
COGS/Inventory
6.7
5.61
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%
%
b. 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
%.
c. 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 tighten v
credit or enforce a
stringent collection policy.
more
The total assets turnover ratio is well below
the industry average so sales should be
increased
assets decreased v
or both.
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