13. Problem 7-13 (Comprehensive Ratio Analysis) eBook Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2018 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $ 230,000 1,575,000 1,150,000 $2,955,000 1,350,000 Accounts payable Notes payable Other current liabilities Total current liabilities Long-term debt Common equity Total liabilities and equity $ 601,866 326,634 539,000 $1,467,500 1,068,750 1,768,750 $4,305,000 Total assets $4,305,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2018 (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 (40%) $7,500,000 6,375,000 815,000 $ 310,000 111,631 $ 198,369 79,348 $ 119,021 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 Days sales outstanding* days 35.0 days COGS/Inventory 6.7 Sales/Fixed assets 12.1 Sales/Total assets 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. 3.0 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. -Select- stringent 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 collection policy. The total assets turnover ratio is well -Select- the industry average so sales should be -Select- , assets -Select- D, or both. compared to the industry - net income should be While the company's profit margin is -Select- than the industry average, its other profitability ratios are -Select- -Select- given the amount of equity and assets. c. Outline Lozano's strengths and weaknesses as revealed by your analysis. credit or enforce a -Select- stringent The firm's days sales outstanding is more than twice as long as the industry average, indicating that the firm shoul collection policy. -Select- slacken tighten The total assets turnover ratio is well -Select- the industry average so sales should be -Select- -- , assets -Select- , or both. -Select- compared to the industry - net income should be While the company's profit margin is -Select- than the industry average, its other profitability ratios are -Select- given the amount of equity and assets. -Select- stringent 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 collection policy. The total assets turnover ratio is well -Select- the industry average so sales should be -Select- , assets -Select- , or both. more less compared to the industry - net income should be While the company's profit margin is -Select- than the industry average, its other profitability ratios are -Select- -Select- given the amount of equity and assets. The total assets turnover ratio is We -Select- the industry average so sales should be -Select- , assets -Select- , or both. above While the company's profit margin il below 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. - he went to save the cases on becomes a year , assets -Select- , or both. The total assets turnover ratio is well -Select- the industry average so sales should b -Select- decreased or increased While the company's profit margin is -Select- than the industry average, its other prices -Select- D given the amount of equity and assets. 3 . Barometry 3 are -Select- compared to the industry - net income should be