Exercise 13-9 Financial Ratios for Assessing Profitability and Managing Debt [LO13-4, LO13-5] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 19,000 Accounts receivable, net 210,000 Merchandise inventory 370,000 Prepaid expenses 8,000 Total current assets 607,000 Property and equipment, net 830,000 Total assets $ 1,437,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 280,000 Bonds payable, 9% 320,000 Total liabilities 600,000 Stockholders equity: Common stock, $5 par value $ 190,000 Retained earnings 647,000 Total stockholders equity 837,000 Total liabilities and stockholders' equity $ 1,437,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales $ 2,150,000 Cost of goods sold 1,240,000 Gross margin 910,000 Selling and administrative expenses 630,000 Net operating income 280,000 Interest expense 28,800 Net income before taxes 251,200 Income taxes (30%) 75,360 Net income $ 175,840 Account balances at the beginning of the year were: accounts receivable, $140,000; and inventory, $350,000. All sales were on account. Assets at the beginning of the year totaled $1,070,000, and the stockholders equity totaled $665,000. 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).) 2. Net profit margin percentage. (Round your answer to the nearest whole percentage place (i.e., 0.1234 should be entered as 12%).) 3. Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 4. Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 5. Was financial leverage positive or negative for the year?