The financial statements for Castile Products, Inc., are given below: Castile Products, Inc.Balance SheetDecember 31  Assets        Current assets:           Cash   $19,000      Accounts receivable, net    220,000      Merchandise inventory    370,000      Prepaid expenses    8,000          Total current assets    617,000   Property and equipment, net    810,000          Total assets   $1,427,000          Liabilities and Stockholders' Equity        Liabilities:           Current liabilities   $230,000      Bonds payable, 11%    310,000          Total liabilities    540,000   Stockholders’ equity:           Common stock, $5 par value   $170,000      Retained earnings    717,000          Total stockholders’ equity    887,000          Total liabilities and stockholders' equity   $1,427,000          Castile Products, Inc.Income StatementFor the Year Ended December 31  Sales$2,220,000   Cost of goods sold 1,180,000       Gross margin 1,040,000   Selling and administrative expenses 640,000       Net operating income 400,000   Interest expense 34,100       Net income before taxes 365,900   Income taxes (30%) 109,770       Net income$256,130            Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $340,000. All sales were on account. Assets at the beginning of the year totaled $1,070,000, and the stockholders’ equity totaled $655,000. 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

Question
Asked Dec 5, 2019
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The financial statements for Castile Products, Inc., are given below:

 

Castile Products, Inc.
Balance Sheet
December 31
  Assets            
  Current assets:            
     Cash       $ 19,000  
     Accounts receivable, net         220,000  
     Merchandise inventory         370,000  
     Prepaid expenses         8,000  
             
  Total current assets         617,000  
  Property and equipment, net         810,000  
             
  Total assets       $ 1,427,000  
             
  Liabilities and Stockholders' Equity            
  Liabilities:            
     Current liabilities       $ 230,000  
     Bonds payable, 11%         310,000  
             
  Total liabilities         540,000  
  Stockholders’ equity:            
     Common stock, $5 par value       $ 170,000  
     Retained earnings         717,000  
             
  Total stockholders’ equity         887,000  
             
  Total liabilities and stockholders' equity       $ 1,427,000  
             
 

 

Castile Products, Inc.
Income Statement
For the Year Ended December 31
  Sales $ 2,220,000  
  Cost of goods sold   1,180,000  
       
  Gross margin   1,040,000  
  Selling and administrative expenses   640,000  
       
  Net operating income   400,000  
  Interest expense   34,100  
       
  Net income before taxes   365,900  
  Income taxes (30%)   109,770  
       
  Net income $ 256,130  
       
 

 

     Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $340,000. All sales were on account. Assets at the beginning of the year totaled $1,070,000, and the stockholders’ equity totaled $655,000.

 

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
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Expert Answer

Step 1

1. Calculate earnings per share:

EPS = Net income / Number of outstanding shares

EPS = $193,300 / ($130,000  / $10)

EPS = $193,300 / 13,000 shares

EPS = $14.87 per share

Step 2

2.

Calculate dividend payout ratio:

Dividend payout ratio = Total dividends / net income

Dividend payout ratio = (13,000 shares * $3.65) / $193,900

Dividend payout ratio = $47,450 / $193,900

Dividend payout ratio = 24.5% or 0.2447

3)

Ca...

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