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Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $ 210,000 1,575,000 1,115,000 $2,900,000 1,315,000 Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt Common equity Total liabilities and equity Total assets $4,215,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands of Dollars) Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (25%) Net income Sales/Fixed assets Sales/Total assets 2.32 76.65 5.72 a. 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) 35.0 days COGS/Inventory 6.7 12.1 5.66 1.76 1.56 2.75 4.47 9.40 < * * * * 38.88 days % % Net income/Sales Net income/Total assets Net income/Common equity Total debt/Total assets Total liabilities/Total assets b. Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Rou For the firm, ROE is 4.47 %. % $ 600,000 100,000 550,000 $1,250,000 400,000 2,565,000 $4,215,000 % 3.0 % $7,500,000 6,375,000 927,000 $ 198,000 40,000 $ 158,000 39,500 $ 118,500 1.2% 3.6% 9.0% 10.0% 60.0%

Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $ 210,000 1,575,000 1,115,000 $2,900,000 1,315,000 Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt Common equity Total liabilities and equity Total assets $4,215,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands of Dollars) Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (25%) Net income Sales/Fixed assets Sales/Total assets 2.32 76.65 5.72 a. 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) 35.0 days COGS/Inventory 6.7 12.1 5.66 1.76 1.56 2.75 4.47 9.40 < * * * * 38.88 days % % Net income/Sales Net income/Total assets Net income/Common equity Total debt/Total assets Total liabilities/Total assets b. Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Rou For the firm, ROE is 4.47 %. % $ 600,000 100,000 550,000 $1,250,000 400,000 2,565,000 $4,215,000 % 3.0 % $7,500,000 6,375,000 927,000 $ 198,000 40,000 $ 158,000 39,500 $ 118,500 1.2% 3.6% 9.0% 10.0% 60.0%

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 89E: Ratio Analysis Rising Stars Academy provided the following information on its 2019 balance sheet and...
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Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $ 210,000 1,575,000 1,115,000 $2,900,000 1,315,000 Sales/Fixed assets Sales/Total assets $4,215,000 (Thousands of Dollars) Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (25%) Net income Accounts payable Notes payable Other current liabilities Total current liabilities Total assets Lozano Chip Company: Income Statement for Year Ended December 31, 2019 Net income/Sales Net income/Total assets Net income/Common equity Total debt/Total assets Total liabilities/Total assets Long-term debt Common equity Total liabilities and equity For the industry, ROE is 9.00 a. 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) 35.0 days 6.7 COGS/Inventory 2.32 % 76.65 5.72 5.66 1.76 1.56 2.75 4.47 9.40 * › 38.88 **> days % % $ 600,000 100,000 550,000 % $1,250,000 400,000 % 2,565,000 $4,215,000 $7,500,000 6,375,000 927,000 $ 198,000 40,000 $ 158,000 39,500 $ 118,500 12.1 3.0 1.2% % b. Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Roun For the firm, ROE is 4.47 %. 3.6% 9.0% 10.0% 60.0%
Transcribed Image Text:Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $ 210,000 1,575,000 1,115,000 $2,900,000 1,315,000 Sales/Fixed assets Sales/Total assets $4,215,000 (Thousands of Dollars) Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (25%) Net income Accounts payable Notes payable Other current liabilities Total current liabilities Total assets Lozano Chip Company: Income Statement for Year Ended December 31, 2019 Net income/Sales Net income/Total assets Net income/Common equity Total debt/Total assets Total liabilities/Total assets Long-term debt Common equity Total liabilities and equity For the industry, ROE is 9.00 a. 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) 35.0 days 6.7 COGS/Inventory 2.32 % 76.65 5.72 5.66 1.76 1.56 2.75 4.47 9.40 * › 38.88 **> days % % $ 600,000 100,000 550,000 % $1,250,000 400,000 % 2,565,000 $4,215,000 $7,500,000 6,375,000 927,000 $ 198,000 40,000 $ 158,000 39,500 $ 118,500 12.1 3.0 1.2% % b. Use the extended DuPont equation to calculate ROE for both Lozano and the industry. Do not round intermediate calculations. Roun For the firm, ROE is 4.47 %. 3.6% 9.0% 10.0% 60.0%
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