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Comprehensive Ratio Analysis

Data for Lozano Chip Company and its industry averagesfollow.

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 EndedDecember 31, 2016 (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

1. Calculate the indicated ratios for Lozano. Round your answersto 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		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 Du Pont equation for both Lozano and theindustry. 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 youranalysis