Homework Answers
1. Gross Margin Percentage = Gross Margin / Sales *100
= 1000000 / 2250000 * 100
= 44.44 %
2. Net Profit Margin Percentage = Net Income / Sales * 100
= 236950 / 2250000 * 100
= 10.53 %
3. Return on Total Assets = EBIT / Net Operating Income / Average Total Assets * 100
Average Total Assets = Opening Assets + Closing Assets / 2
= 1100000 + 1452000 / 2
= 1276000
Return on Total Assets = EBIT / Net Operating Income / Average Total Assets * 100
= 370000 /1276000
= 28.99 % or 29 %
4. Return on Equity = Net Income / Average Stockholders Equity
Average Stockholders Equity = Opening Stockholders Equity + Closing Stockholders Equity / 2
= 725000 + 872000 /2
= 798500
Return on Equity = Net Income / Average Stockholders Equity * 100
= 236950 / 798500 * 100
= 29.67 %
5. Degree of financial leverage = EBIT or Net Operating Income / EBIT or Net Operating Income - Interest
= 370000 / 370000 - 31500
= 370000 / 338500
= 1.09
Financial Leverage = Total Debt / Total Equity
= 350000 / 872000
= 0.40
Therefore the Financial leverage is positive for the year.
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The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
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