Question

Ch 13 excersises #3

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

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash				$	20,000
Accounts receivable, net					170,000
Merchandise inventory					310,000
Prepaid expenses					10,000
Total current assets					510,000
Property and equipment, net					900,000
Total assets				$	1,410,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities				$	290,000
Bonds payable, 11%					360,000
Total liabilities					650,000
Stockholders’ equity:
Common stock, $5 par value				$	190,000
Retained earnings					570,000
Total stockholders’ equity					760,000
Total liabilities and stockholders' equity				$	1,410,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,240,000
Cost of goods sold		1,170,000
Gross margin		1,070,000
Selling and administrative expenses		600,000
Net operating income		470,000
Interest expense		39,600
Net income before taxes		430,400
Income taxes (30%)		129,120
Net income	$	301,280

Account balances at the beginning of the year were: accounts receivable, $150,000; and inventory, $330,000. All sales were on account. Assets at the beginning of the year totaled $1,050,000, and the stockholders’ equity totaled $635,000.

Required:

Compute the following:

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

      

b.	Net profit margin percentage. (Round your answer to the nearest whole percentage place (i.e., 0.1234 should be entered as 12%).)

        

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

       

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

       

e.	Was financial leverage positive or negative for the year?
	Positive Negative

Answer 1