The financial statements for Castile Products, Inc., are givenbelow:
Castile Products, Inc.
Balance Sheet
December 31
Assets
Current assets:
Cash $ 19,000
Accounts receivable, net220,000
Merchandise inventory 330,000
Prepaid expenses 8,000
Total current assets 577,000
Property and equipment, net 850,000
Total assets $ 1,427,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities $ 270,000
Bonds payable, 12% 390,000
Total liabilities 660,000
Stockholdersâ equity:
Common stock, $5 par value $140,000
Retained earnings 627,000
Total stockholdersâ equity 767,000
Total liabilities and stockholders' equity $1,427,000
Castile Products, Inc.
Income Statement
For the Year Ended December 31
Sales $ 2,250,000
Cost of goods sold 1,170,000
Gross margin 1,080,000
Selling and administrative expenses 570,000
Net operating income 510,000
Interest expense 46,800
Net income before taxes 463,200
Income taxes (30%) 138,960
Net income $ 324,240
Account balances at the beginningof the year were: accounts receivable, $190,000; and inventory,$310,000. All sales were on account. Assets at the beginning of theyear totaled $1,050,000, and the stockholdersâ equity totaled$645,000.
Required:
Compute the following:
1.
Gross margin percentage. (Round your percentage answer to 2decimal places (i.e., 0.1234 should be entered as 12.34).)
2.
Net profit margin percentage. (Round your answer to the nearestwhole percentage place (i.e., 0.1234 should be entered as12%).)
3.
Return on total assets. (Round your percentage answer to 1decimal place (i.e., 0.1234 should be entered as 12.3).)
4.
Return on equity. (Round your percentage answer to 1 decimalplace (i.e., 0.1234 should be entered as 12.3).)
5. Was financial leverage positive or negative for theyear?
Positive
Negative
