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

Question

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

     Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $320,000. All sales were on account. Assets at the beginning of the year totaled $1,080,000, and the stockholders’ equity totaled $635,000.

Gross margin percentage. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)

Net profit margin percentage. (Round your answer to the nearest whole percentage place (i.e., 0.1234 should be entered as 12%).)

Return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

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

Explanation / Answer

Gross Margin % = Gross profit / Sales

                        = 1110000/2290000 i.e 48.47%

Net Margin % = Net Profit / Sales

                    = 294840/2290000 i.e 12.88%

Return on total asssets = EBIT/ Average Total assets

                                   = 450000/(1080000+1357000)/2 i.e 36.93%

Return on equity = Net Income / Average Shareholders Equity

                         = 294840/( 635000+727000)/2

                         = 43.30%

Financial leverage = EBIT / EBT

                           = 450000/421200 i.e 1.0683

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