The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc.

Balance Sheet

December 31

Assets

Current assets:

Cash $ 20,000

Accounts receivable, net 240,000

Merchandise inventory 370,000

Prepaid expenses 12,000

Total current assets 642,000

Property and equipment, net 880,000

Total assets $ 1,522,000

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ 290,000

Bonds payable, 8% 390,000

Total liabilities 680,000

Stockholders equity:

Common stock, $5 par value $ 140,000

Retained earnings 702,000

Total stockholders equity 842,000

Total liabilities and stockholders' equity $ 1,522,000

Castile Products, Inc.

Income Statement

For the Year Ended December 31

Sales $ 2,160,000

Cost of goods sold 1,170,000

Gross margin 990,000

Selling and administrative expenses 600,000

Net operating income 390,000

Interest expense 31,200

Net income before taxes 358,800

Income taxes (30%) 107,640

Net income $ 251,160

Account balances at the beginning of the year were: accounts receivable, $150,000; and inventory, $270,000. All sales were on account. Assets at the beginning of the year totaled $1,030,000, and the stockholders equity totaled $675,000.

Required:

Compute the following:

1. Gross margin percentage. (Round your percentage answer to 2 decimal places (i.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 (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).)

5. Was financial leverage positive or negative for the year?

Positive

Negative