5.

Was financial leverage positive or negative for the year?

	Positive
	Negative

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 160,000 Merchandise inventory 350,000 Prepaid expenses 8,000 Total current assets 540,000 Property and equipment, net 810,000 Total assets $1,350,000 $ 250,000 370,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 11% Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 620,000 $ 100,000 630,000 730,000 $1,350,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales $2,290,000 Cost of goods sold 1,210,000 1,080,000 580,000 Gross margin Selling and administrative expenses Net operating income Interest expense 500,000 40,700 Net income before taxes Income taxes (30%) Net income 459,300 137,790 $ 321,510 Account balances at the beginning of the year were accounts receivable, $170,000; and inventory, $340,000. All sales were on account. Assets at the beginning of the year totaled $1,020,000, and the stockholders' equity totaled $675,000. 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).) Gross margin percentage % 2. Net profit margin percentage. (Round your answer to the nearest whole percentage place (i.e., 0.1234 should be entered as 12%).) Net profit margin percentage 3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Return on total assets % 4. Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Return on equity %