# Problem 7-13 Comprehensive Rat

Problem 7-13Comprehensive Ratio Analysis

Data for Lozano Chip Company and its industry averagesfollow.

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 EndedDecember 31, 2015 (Thousands of Dollars)

 Sales \$7,859,000 Cost of goods sold 6,372,000 Selling, general, and administrative expenses 810,000 Earnings before interest and taxes (EBIT) \$    677,000 Interest expense 98,000 Earnings before taxes (EBT) \$    579,000 Federal and state income taxes (40%) 231,600 Net income \$    347,400
1. Calculate the indicated ratios for Lozano. Round your answersto two decimal places. Do not round intermediate calculations.
 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 3.0 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.
2. Construct the extended DuPont equation for both Lozano and theindustry. Round your answers to two decimal places. Do not roundintermediate calculations.
 For the firm, ROE is % For the industry, ROE is %

c. Outline Lozano’s strengths and weaknesses as revealed by youranalysis.

Answrer A :

 Lozano Chip Compant Industry Average Current assets/Currentliabilities 1.98 2 Days sales outstanding* days 71.89 35.0 days COGS/Inventory 5.38 6.7 Sales/Fixed assets 5.84 12.1 Sales/Total assets 1.83 3 Net income/Sales % 4% 1.20% Net income/Total assets % 8% 3.60% Net income/Common equity % 19% 9.00% Total debt/Total assets % 24% 30.00% Total liabilities/Totalassets % 35% 60.00%

 Lozano Chip Compant Industry Average Analysis Current assets/Currentliabilities 1.98 2 Adverse Days sales outstanding* days 71.89 35.0 days Adverse COGS/Inventory 5.38 6.7 Favourable Sales/Fixed assets 5.84 12.1 Adverse Sales/Total assets 1.83 3 Adverse Net income/Sales % 4% 1.20% Favourable Net income/Total assets % 8% 3.60% Favourable Net income/Common equity % 19% 9.00% Favourable Total debt/Total assets % 24% 30.00% Favourable Total liabilities/Totalassets % 35% 60.00% Favourable

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