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The financial statements for Castile Products Inc, are given below:
The financial statements for Castile Products Inc, are given below:Castile Products. Inc. Balance Sheet December 31
Assets
Current assets:
Cash $22,000
Accounts receivable, net 230,000
Merchanside inventory 350,000
Prepaid expenses 9,000
Total current assets 611,000
Property and equipment, net 860,000
Total assets $1,471,000
Liabiliites and Stockholders' Equity
Liabilities
Current liabilities $270,000
Bonds payable, 10% 390,000
Total liabiliites
Stockholders' Equity
Common stock, $5par value $110,000
Retained earnings 701,000
Total stockholders' equity 811,000
Total liabilities and stockholders' equity $1,471,000
Castile Products, Inc. Income Statement, For the Year, ended December 21
Sales $2,220,00
Cost of goods sold 1,220,000
Gross margin 1,000,000
Selling and administrative expenses 620,000
Net operating income 380,000
Interest expense 39,000
Net income before taxes 341,000
Income taxes (30%) 102,300
Net income $238,700
Account balances at the beginning of the year were: accounts receivable, $150,000 and inventory $270,000. All sales were on account. Assets at the beginning of the year totaled $1,070,000 and the stockholders' equity totaled $655,000.
Required
Compute the following"
1. Gross margin percentage. (Round your percentage answer to 2 decimal places)
2. Net profit margin percentage (round your answer to the nearest whole percentage place)
3. Return on total assets (Round your percentage answer to 1 decimal place)
4. Return on equity (Return your percentage answer to 1 decimal place)
5. Was financial leverage positive or negative for the year?
Final answer:The gross margin percentage for Castile Products Inc. was 45.05%, the net profit margin was 11%, the return on total assets was 16.2% and the return on equity was 29.4%. The financial leverage for the year was positive, given the increase in net income and assets.Explanation:Ratio Calculations and Financial Leverage AnalysisTo calculate the requested financial ratios and assess the financial leverage of Castile Products Inc, we use the financial data provided in the balance sheet and income statement.Gross margin percentageis the Gross Margin divided by Sales, multiplied by 100. In this case, it's (1,000,000/2,220,000)*100 = 45.05%. It indicates the proportion of money left over from revenues after accounting for the cost of goods sold.Net profit margin percentageis the Net Income divided by Sales, multiplied by 100. Here it's (238,700/2,220,000)*100 = 11%. This ratio indicates how much profit a company makes per dollar of sales.Return on total assets (ROA)is the Net Income divided by Total Assets, multiplied by 100. So, (238,700/1,471,000)*100 = 16.2%. ROA gives an idea as to how efficiently management is using its assets to generate earnings.The Return on equity (ROE) is the Net Income divided by the Stockholders' equity, multiplied by 100: (238,700/811,000)*100 = 29.4%. ROE measures how profitable a company is by comparing its net income to its average shareholders' equity.Lastly, financial leverage is consideredpositivewhen a company has gained more than it has lost from borrowing, and negative when it loses more than it gains from borrowing. Here, given the increase in net income and in assets, it can be considered that the financial leverage was positive for the year.Learn more about Financial Ratios here:brainly.com/question/31531442#SPJ11...