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.

Lozano Chip Company: Balance Sheet as of December 31, 2013 (Thousands

Lozano Chip Company: Income Statement for Year Ended December 31, 2013
(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

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Cash Receivables Inventories s 225,000 Accounts payable 1,575,000 Notes payable $601,866 326,634 1,125,000 Other current liabilities25,000 $2,950,000 Total current liabilities $1,453,500 1,068,750 Total current assets Net fixed assets 1,350,0p0 Long-term debt Common equity Total assets 4,275,000 Total liabilities and equity $4,275,000 Ratio Current assets/Current liabilities Days sales outstanding COGS/Inventory 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 Industry Average 2.0 Lozano (365-day year) 35.0 days 6.7 12.1 3.0 1.2% 35% 90% 30.0% 60.0%