Exercise 16-9 (Static) Financial Ratios for Assessing Profitability and Managing Debt [LO16-4, LO16-5] The financial statements for Castile Products, Incorporated, are given below: Assets Castile Products, Incorporated Balance Sheet December 31 Current assets: 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, 10% Total liabilities Stockholders' equity: Common stock, $5 per value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 6,500 35,000 70,000 3,500 115,000 185,000 $ 300,000 $ 50,000 80,000 130,000 30,000 140,000 170,000 $ 300,000 Sales Castile Products, Incorporated Income Statement For the Year Ended December 31 Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income $ 420,000 292,500 127,500 89,500 38,000 8,000 3, 9,000 $ 21,000 Account balances at the beginning of the year were: accounts receivable, $25,000; and Inventory. $60,000. All sales were on account. Assets at the beginning of the year totaled $280,000, and the stockholders' equity totaled $161,600. Required: Compute the following: 1. Gross margin percentage. (Round your percentage answer to 2 decimal places (1.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 (1.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? 1. Gross margin percentage 2. Net profit margin percentage 3. Return on total assets 4. Return on equity 5. Financial Leverage %