Calculate:

Price-earnings ratio. Return on total assets.

Return on common shareholders' equity. Was financial leverage positive or negative for the year? Explain.

AAR Company Balance Sheet December 31 $21,000 160,000 300,000 9,000 490,000 810,000 $1,300,000 Current assets: Cash and marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Noncurrent assets: Plant & equipment, net Total assets Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Noncurrent liabilities: Bonds payable Total liabilities Shareholders' equity Common shares, $5 par Retained earnings Total shareholders' equity Total liabilities & shareholders' equity $75,000 25,000 100,000 200,000 300,000 500,000 100,000 700.000 800,000 $1,300,000 AAR Company Income Statement For the Year Ended December 31 (dollars in thousands) Sales (all on account) Cost of goods sold Gross margin Operating expenses Net operating Income Interest expense Net Income before taxes Income taxes (30%) Net Income $2,100,000 1,770,000 330,000 130,000 200,000 50,000 150,000 45,000 $105,000 AAR Company paid dividends of $3.15 per share during the year. The market price of the company's shares at December 31 was $63 per share. Assets at the beginning of the year totalled $1,100,000, and shareholders' equity totalled $725,000. The balance of accounts receivable at the beginning of the year was $150,000. The balance in inventory at the beginning of the year was $250,000