Question

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	535,000
Total current assets	$2,925,000		Total current liabilities	$1,235,000
Net fixed assets	1,335,000		Long-term debt	400,000
			Common equity	2,625,000
Total assets	$4,260,000		Total liabilities and equity	$4,260,000

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	941,000
Earnings before interest and taxes (EBIT)	$   184,000
Interest expense	40,000
Earnings before taxes (EBT)	$   144,000
Federal and state income taxes (25%)	36,000
Net income	$   108,000

1. Calculate the indicated ratios for Lozano. Do not round intermediate calculations. Round your answers to two decimal places.

   Ratio	Lozano	Industry Average
   Total debt/Total assets	%	10.0	%
   Total liabilities/Total assets	%	60.0	%

Answer 1

1. Total debt=Notes payable+Long term debt=100,000+400,000=500,000

Total assets=$4,260,000

Total debt/Total assets=$500,000/$4,260,000=11.74%

2. Total liabilities=Total current liabilities+Long term debt=$1235000+$400000=$1635000

Total Liabilities/Total assets=$1635000/$4260000=38.38%