Question

The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc.
Balance Sheet
December 31
  Assets
  Current assets:
     Cash $ 6,500
     Accounts receivable, net 35,000
     Merchandise inventory 70,000
     Prepaid expenses 3,500
  Total current assets 115,000
  Property and equipment, net 185,000
  Total assets $ 300,000
  Liabilities and Stockholders' Equity
  Liabilities:
     Current liabilities $ 50,000
     Bonds payable, 10% 80,000
  Total liabilities 130,000
  Stockholders’ equity:
     Common stock, $5 par value $ 30,000
     Retained earnings 140,000
  Total stockholders’ equity 170,000
  Total liabilities and stockholders' equity $ 300,000
Castile Products, Inc.
Income Statement
For the Year Ended December 31
  Sales $ 420,000
  Cost of goods sold 292,500
  Gross margin 127,500
  Selling and administrative expenses 89,500
  Net operating income 38,000
  Interest expense 8,000
  Net income before taxes 30,000
  Income taxes (30%) 9,000
  Net income $ 21,000

     Account balances at the beginning of the year were: accounts receivable, $25,000; and inventory, $60,000. All sales were on account. Assets at the beginning of the year totaled $280,000, and the stockholders’ equity totaled $161,600.

Required:
Compute the following:
1.

Gross margin percentage. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)


      

2.

Net profit margin percentage. (Round your percentage answer to nearest whole number.)

       


3.

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)


       

4.

Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)


       

5. Was financial leverage positive or negative for the year?

Positive

Negative

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