Exercise 14-9 Financial Ratios for Assessing Profitability and Managing Debt [LO14-4, L014-5] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: $ 19,000 190,000 350,000 6,000 565, 000 890,000 $1,455, 000 Cash Accounts receivable, net Merchandise inventory Prepaid expenses Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 11% s 200,000 370,000 570,000 Total liabilities Stockholders' equity: $ 170,000 715,000 885,000 Common stock, Retained earnings $10 per value Total stockholders' equity Total liabilities and stockholders' equity $1,455,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income $2,250,000 1,180,000 1,070,000 570,000 500,000 40,700 459,300 137,790 321,510 Account balances at the beginning of the year were: accounts receivable, $220,000; and inventory, $300,000. All sales were on account. Assets at the beginning of the year totaled $1,060,000, and the stockholders' equity totaled $675,000. Required: Compute the following: (For Requirements 1 to 4, enter your percentage answers rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 4. Return on equity 5. Was financial leverage positive or negative for the year? 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 4. Return on equity 5. Financial Leverage