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

Question

The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses $ 6,500 35,000 70,000 3,500 Total current assets Property and equipment, net 115,000 185,000 Total assets $300,000 Liabilities and Stockholders' Equity Liabilities Current liabilities Bonds payable, 10% $50,000 80,000 130,000 $30,000 Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings 140,000 170,000 $300,000 Total stockholders' equity Total liabilities and stockholders' equity

Explanation / Answer

Return on Total Assets = 12.67% Return on Total Assets = EBIT / Total Assets EBIT = $38,000 Total Assets = $300,000 Return on Total Assets = $38,000/$300,000 = 12.67% Return on Equity = 12.35% Return on Equity = Net Income / Share holders Equity Net Income = $21,000 Share holders Equity = $170,000 Return on Equity = $21,000/$170,000 = 12.35%

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