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				$	22,000
Accounts receivable, net					190,000
Merchandise inventory					320,000
Prepaid expenses					9,000
Total current assets					541,000
Property and equipment, net					890,000
Total assets				$	1,431,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities				$	260,000
Bonds payable, 9%					310,000
Total liabilities					570,000
Stockholders equity:
Common stock, $5 par value				$	170,000
Retained earnings					691,000
Total stockholders equity					861,000
Total liabilities and stockholders' equity				$	1,431,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	2,200,000
Cost of goods sold		1,220,000
Gross margin		980,000
Selling and administrative expenses		610,000
Net operating income		370,000
Interest expense		27,900
Net income before taxes		342,100
Income taxes (30%)		102,630
Net income	$	239,470

Account balances at the beginning of the year were: accounts receivable, $230,000; and inventory, $270,000. All sales were on account. Assets at the beginning of the year totaled $1,070,000, and the stockholders equity totaled $625,000.

Required:

Compute the following:

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).)