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2. The income statement of Tavis Corporation and selected additional data are presented below: Tavis Corporation Income Statement For the Year Ended December 31, 2006

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2. The income statement of Tavis Corporation and selected additional data are presented below: Tavis Corporation Income Statement For the Year Ended December 31, 2006 Net sales $194,000 Cost of goods sold 93,000 Gross profit 101,000 Selling and general expenses_66,000 Income from operations35,000 Interest expense 9,000 Income before income tax26,000 Income tax expense 8,000 Net income $ 18,000 Additional data: Total assets $204,000 Common stockholders' equity Preferred dividends $ 4,000 $ 96,000 Required: Calculate the following ratios for the current year: a. return on sales b. return on assets c. return on equity Was the company's financial leverage positive or negative? Why? Solution

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