Return Ratios and Leverage The following selected data are taken from the financial statements of Redwood Enterprises: Sales revenue Cost of goods sold Gross profit Selling and administrative expense Operating income Interest expense $643,000 359,000 $284,000 100,000 $184,000 50,000 Income before tax $134,000 Income tax expense (40%) 53,600 Net income $80,400 Accounts payable Accrued liabilities Income taxes payable Interest payable Short-term loans payable $45,000 70,000 10,000 25,000 150,000 Total current liabilities $300,000 Long-term bonds payable $500,000 Preferred stock, 10%, $100 par $250,000 Common stock, no par 600,000 Retained earnings 350,000 $1,200,000 $2,000,000 Total stockholders' equity Total liabilities and stockholders' equity Required: 1. Compute the following ratios for Redwood Enterprises: a. Return on sales b. Asset turnover (Assume that total assets at the beginning of the year were $1,600,000.) c. Return on assets d. Return on common stockholders' equity (Assume that the only changes in stockholders' equity during the year were from the net income for the year and dividends on the preferred stock.) When computing percentage amounts, carry out calculations to four decimal places, but enter your answers to two decimal places; for example, .17856 rounds to .1786 and would be entered as 17.86. a. Return on sales b. Asset turnover (round to 2 decimal places) c. Return on assets d. Return on common stockholders' equity % times % % 2. Comment on Evergreen's use of leverage. Has it successfully employed leverage?