Question

In: Finance

Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...

Comprehensive Ratio Analysis

Data for Lozano Chip Company and its industry averages follow.

Lozano Chip Company: Balance Sheet as of December 31, 2019
(Thousands of Dollars)
Cash $   220,000 Accounts payable $   600,000
Receivables 1,575,000 Notes payable 100,000
Inventories 1,145,000 Other current liabilities 520,000
  Total current assets $2,940,000   Total current liabilities $1,220,000
Net fixed assets 1,340,000 Long-term debt 400,000
Common equity 2,660,000
Total assets $4,280,000 Total liabilities and equity $4,280,000
Lozano Chip Company: Income Statement for Year Ended December 31, 2019
(Thousands of Dollars)
Sales $7,500,000
Cost of goods sold 6,375,000
Selling, general, and administrative expenses 931,000
  Earnings before interest and taxes (EBIT) $   194,000
Interest expense 40,000
  Earnings before taxes (EBT) $   154,000
Federal and state income taxes (25%) 38,500
Net income $   115,500
  1. 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)   days 35.0 days
    COGS/Inventory 6.7
    Sales/Fixed assets 12.1
    Sales/Total assets 3.0
    Net income/Sales   % 1.2 %
    Net income/Total assets   % 3.6 %
    Net income/Common equity   % 9.0 %
    Total debt/Total assets   % 10.0 %
    Total liabilities/Total assets   % 60.0 %
  2. 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   %.

  3. 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-slacken tighten Item 13 credit or enforce a -Select-more lessItem 14 stringent collection policy.

    The total assets turnover ratio is well -Select-abovebelowItem 15 the industry average so sales should be -Select-decreasedincreasedItem 16 , assets -Select-decreased increasedItem 17 , or both.

    While the company's profit margin is -Select-higher lowerItem 18 than the industry average, its other profitability ratios are -Select-highlowItem 19 compared to the industry - net income should be -Select-higherlowerItem 20 given the amount of equity and assets.

Solutions

Expert Solution


Related Solutions

Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
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 $   215,000 Accounts payable $   601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,145,000 Other current liabilities 525,000   Total current assets $2,935,000   Total current liabilities $1,453,500 Net fixed assets 1,340,000 Long-term debt 1,068,750 Common equity 1,752,750 Total assets $4,275,000 Total liabilities and equity $4,275,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2018 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
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 $ 215,000 Accounts payable $ 601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,150,000 Other current liabilities 532,000 Total current assets $2,940,000 Total current liabilities $1,460,500 Net fixed assets 1,325,000 Long-term debt 1,068,750 Common equity 1,735,750 Total assets $4,265,000 Total liabilities and equity $4,265,000 Lozano Chip Company: Income Statement for Year Ended December 31,...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
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 $   225,000 Accounts payable $   601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,130,000 Other current liabilities 527,000   Total current assets $2,930,000   Total current liabilities $1,455,500 Net fixed assets 1,325,000 Long-term debt 1,068,750 Common equity 1,730,750 Total assets $4,255,000 Total liabilities and equity $4,255,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2018 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $   225,000 Accounts payable $   600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,125,000 Other current liabilities 520,000   Total current assets $2,925,000   Total current liabilities $1,220,000 Net fixed assets 1,325,000 Long-term debt 400,000 Common equity 2,630,000 Total assets $4,250,000 Total liabilities and equity $4,250,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
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 $   230,000 Accounts payable $   601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,125,000 Other current liabilities 539,000   Total current assets $2,930,000   Total current liabilities $1,467,500 Net fixed assets 1,350,000 Long-term debt 1,068,750 Common equity 1,743,750 Total assets $4,280,000 Total liabilities and equity $4,280,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2018 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
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 $   225,000 Accounts payable $   601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,150,000 Other current liabilities 539,000   Total current assets $2,950,000   Total current liabilities $1,467,500 Net fixed assets 1,325,000 Long-term debt 1,068,750 Common equity 1,738,750 Total assets $4,275,000 Total liabilities and equity $4,275,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2018 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $   235,000 Accounts payable $   600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,130,000 Other current liabilities 560,000   Total current assets $2,940,000   Total current liabilities $1,260,000 Net fixed assets 1,360,000 Long-term debt 400,000 Common equity 2,640,000 Total assets $4,300,000 Total liabilities and equity $4,300,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $   235,000 Accounts payable $   600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,130,000 Other current liabilities 545,000   Total current assets $2,940,000   Total current liabilities $1,245,000 Net fixed assets 1,315,000 Long-term debt 400,000 Common equity 2,610,000 Total assets $4,255,000 Total liabilities and equity $4,255,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company:...
Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $  225,000 Accounts payable $601,866 Receivables 1,575,000 Notes payable 326,634 Inventories 1,125,000 Other current liabilities 525,000   Total current assets $2,925,000   Total current liabilities $1,453,500 Net fixed assets 1,350,000 Long-term debt 1,068,750 Common equity 1,752,750 Total assets $4,275,000 Total liabilities and equity $4,275,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2016 (Thousands...
Problem 7-13 Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano...
Problem 7-13 Comprehensive Ratio Analysis Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2015 (Thousands of Dollars) Cash $  206,000 Accounts payable $606,300 Receivables 1,548,000 Notes payable 332,900 Inventories 1,184,000 Other current liabilities 547,000   Total current assets $2,938,000   Total current liabilities $1,486,200 Net fixed assets 1,345,000 Long-term debt 1,007,100 Common equity 1,789,700 Total assets $4,283,000 Total liabilities and equity $4,283,000 Lozano Chip Company: Income Statement for Year Ended December 31,...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT