Data for Lozano Chip Company and its industry averages follow.

a. Calculate the indicated ratios for Lozano.

b. Construct the extended Du Pont equation for both Lozano and the industry.

c. Outline Lozano's strengths and weaknesses as revealed by your analysis.

d. Suppose Lozano had doubled its sales as well as its inventories, accounts receivable, and common equity during 2012. How would that information affect the validity of your ratio analysis?

lozano Chip Company: Balance sheet as of December 31, 2012

(Thousands of Dollars)

lozano Chip Company: Income statement for year Ended December 31,
2012 (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

aCalculation is based on a 365-day year.

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601,866 326,634 595.000 Total current assets $2,950,000 Total current liabilities $1,453,500 1,068,750 1,752,750 Cash Receivables Inventories ,575,000 Notes payable 1,125,000 Other current liabilities ,350,000 Long-term debt 4,275,000 Total liabilities and equity $4,975.000 Net fixed assets Common equity Total assets Ratio Lozano Industry Average 2.0 Current assets/Current liabilities Days sales outstanding Sales/Inventory Sales/Fixed assets Sales/Total assets Net income/Sales Net income/Total assets Net income/Common equity Total liabilities/Total assets 35.0 days 6.7 12.1 3.0 1.2% 3.6% 90% 600%