Exercise 15-9 Financial Ratios for Assessing Profitability and Managing Debt [LO15-4, LO15-5] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: $ 22,000 240,000 300,000 7,000 569,000 870,000 $1,439,000 Cash Accounts receivable, net Merchandise inventory Prepaid expenses Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 210,000 330,000 540,000 Bonds payable, 8% Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings $ 150,000 749,000 899,000 $1,439,000 Total stockholders' equity Total liabilities and stockholders' equity 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 incomebefore taxes Income taxes (30%) Net income $2,100,000 1,250,000 850,000 580,000 270,000 26,400 243,600 73,080 $ 170,520 Account balances at the beginning of the year were: accounts receivable, $140,000; and inventory, $340,000. All sales were on account. Assets at the beginning of the year totaled $1,050,000, and the stockholders' equity totaled $715,000 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