Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as...

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Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets Total assets $ 220,000 1,575,000 1,135,000 $2,930,000 1,350,000 $4,280,000 (Thousands of Dollars) Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt Common equity Total liabilities and equity Lozano Chip Company: Income Statement for Year Ended December 31, 2019 Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense $ 600,000 100,000 555,000 $1,255,000 400,000 2,625,000 $4,280,000 Days sales outstanding (365-day year), COGS/Inventory Earnings before taxes (EBT) Federal and state income taxes (25%) Net Income 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 35.0 days 6.7 days $7,500,000 6,375,000 925,000 $ 200,000 40,000 $ 160,000 40,000 $ 120,000 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 3.0 Sales/Fixed assets Sales/Total assets Net income/Sales Net income/Total assets Net income/Common equity Total debt/Total assets Total liabilities/Total assets days % % % % % 1.2% 3.6% 9.0% 10.0% 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 -Select- credit or enforce a -Select-stringent collection policy. The total assets turnover ratio is well-Select- the industry average so sales should be -Select- both. , assets -Select- or While the company's profit margin is-Select-than the industry average, its other profitability ratios are -Select- compared to the industry net income should be -Select- given the amount of equity and assets. Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets Total assets $ 220,000 1,575,000 1,135,000 $2,930,000 1,350,000 $4,280,000 (Thousands of Dollars) Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt Common equity Total liabilities and equity Lozano Chip Company: Income Statement for Year Ended December 31, 2019 Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense $ 600,000 100,000 555,000 $1,255,000 400,000 2,625,000 $4,280,000 Days sales outstanding (365-day year), COGS/Inventory Earnings before taxes (EBT) Federal and state income taxes (25%) Net Income 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 35.0 days 6.7 days $7,500,000 6,375,000 925,000 $ 200,000 40,000 $ 160,000 40,000 $ 120,000 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 3.0 Sales/Fixed assets Sales/Total assets Net income/Sales Net income/Total assets Net income/Common equity Total debt/Total assets Total liabilities/Total assets days % % % % % 1.2% 3.6% 9.0% 10.0% 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 -Select- credit or enforce a -Select-stringent collection policy. The total assets turnover ratio is well-Select- the industry average so sales should be -Select- both. , assets -Select- or While the company's profit margin is-Select-than the industry average, its other profitability ratios are -Select- compared to the industry net income should be -Select- given the amount of equity and assets.

Answer rating: 100% (QA)

Lozano Chip Company Analysis a Ratios Ratio Lozano Industry Average Current assetsCurrent liabilitie... View the full answer