Gulf Controls, Inc., has a net profit margin of 10 percent and earnings after taxes of $600,000.

Question:

Gulf Controls, Inc., has a net profit margin of 10 percent and earnings after taxes of $600,000. Its current follows:

a. Calculate Gulf€™s return on stockholders€™ equity.
b. The industry average ratios are as follows:
Net profit margin ......... 6%
Total asset turnover ......... 2.5 times
Equity multiplier ......... 1.4 times
Compare Gulf Controls with the average firm in the industry. What is the source of the major differences between the Gulf and the industry averageratios?

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...