Comprehensive Ratio AnalysisData for Lozano Chip Company and its industry averages follow.Lozano Chip Company: Balance Sheet as of December 31, 2016 (Thousands of Dollars)Cash$ 225,000 Accounts payable$601,866Receivables1,575,000 Notes payable326,634Inventories1,125,000 Other current liabilities525,000 Total current assets$2,925,000 Total current liabilities$1,453,500Net fixed assets1,350,000 Long-term debt1,068,750 Common equity1,752,750Total assets$4,275,000 Total liabilities and equity$4,275,000Lozano Chip Company: Income Statement for Year Ended December 31, 2016 (Thousands of Dollars)Sales$7,500,000Cost of goods sold6,375,000Selling, general, and administrative expenses825,000 Earnings before interest and taxes (EBIT)$ 300,000Interest expense111,631 Earnings before taxes (EBT)$ 188,369Federal and state income taxes (40%)75,348Net income$ 113,022 Calculate the indicated ratios for Lozano. Round your answers to two decimal places.Ratio LozanoIndustry AverageCurrent assets/Current liabilities 2.0Days sales outstanding* days35.0 daysCOGS/Inventory 6.7Sales/Fixed assets 12.1Sales/Total assets 3.0Net 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 the industry. 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 your analysis

Answered: Comprehensive Ratio Analysis Data for…

Managerial Accounting: The Cornerstone of Business Decision-Making

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ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

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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, 2016 (Thousands of Dollars)

Cash	$ 225,000	Accounts payable	$601,866
Receivables	1,575,000	Notes payable	326,634
Inventories	1,125,000	Other current liabilities	525,000
Total current assets	$2,925,000	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 Ended December 31, 2016 (Thousands of Dollars)

Sales	$7,500,000
Cost of goods sold	6,375,000
Selling, general, and administrative expenses	825,000
Earnings before interest and taxes (EBIT)	$ 300,000
Interest expense	111,631
Earnings before taxes (EBT)	$ 188,369
Federal and state income taxes (40%)	75,348
Net income	$ 113,022

Calculate the indicated ratios for Lozano. Round your answers to two decimal places.

Ratio	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 the industry. 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 your analysis

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