Comprehensive Ratio AnalysisData for Lozano Chip Company and its industry averages follow.Lozano Chip Company: Balance Sheet as of December 31, 2019(Thousands of Dollars)Cash$ 240,000Accounts payable$ 600,000Receivables1,575,000Notes payable100,000Inventories1,135,000Other current liabilities560,000Total current assets$2,950,000Total current liabilities$1,260,000Net fixed assets1,315,000Long-term debt400,000Common equity2,605,000Total assets$4,265,000Total liabilities and equity$4,265,000Lozano Chip Company: Income Statement for Year Ended December 31, 2019(Thousands of Dollars)Sales$7,500,000Cost of goods sold6,375,000Selling, general, and administrative expenses943,000Earnings before interest and taxes (EBIT)$ 182,000Interest expense40,000Earnings before taxes (EBT)$ 142,000Federal and state income taxes (25%)35,500Net income$ 106,500a. Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers totwo decimal places. RatioLozanoIndustry AverageCurrent assets/Current liabilities2.0Days sales outstanding (365-day year)days35.0 daysCOGS/Inventory6.7Sales/Fixed assets12.1Sales/Total assets3.0Net 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 roundintermediate 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 thefirm should -Select- v credit or enforce a-Select- v stringent collection policy.The total assets turnover ratio is well -Select- v the industry average so sales should be -Select-assets -Select-or both.While the company's profit margin is -select- v than the industry average, its other profitability ratios are-Select- v compared to the industry - net income should be -Select- v given the amount of equity andassets.

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

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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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