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FIN - Lozano Chip Company

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Question;(3-13) 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 (Thousandsof Dollars)Cash $ 225,000 Accounts payable $ 601,866Receivables 1,575,000 Notes payable 326,634Inventories 1,125,000 Other current liabilities 525,000Total current assets $2,950,000 Total current liabilities $1,453,500Net fixed assets 1,350,000 Long-term debt 1,068,750__________ Common equity 1,752,750Total assets $4,275,000 Total liabilities and equity $4,275,000Lozano Chip Company: Income Statement for Year Ended December 31, 2013(Thousands of Dollars)Sales $ 7,500,000Cost of goods sold 6,375,000Selling, general, and administrative expenses 825,000Earnings before interest and taxes (EBIT) $ 300,000Interest expense 111,631Earnings before taxes (EBT) $ 188,369Federal and state income taxes (40%) 75,348Net income $ 113,022Ratio Lozano Industry AverageCurrent assets/Current liabilities __________ 2.0Days sales outstanding (365-day year) __________ 35.0 daysCOGS/Inventory __________ 6.7Sales/Fixed assets __________ 12.1Sales/Total assets __________ 3.0Net 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%

 

Paper#48256 | Written in 18-Jul-2015

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