Digital Relay has both preferred and common stock outstanding. The company reported the following information for 19X7: a. Compute the gross profit margin ratio, the

Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:

a. Compute the gross profit margin ratio, the return on equity and the return on assets, rounding calculations to two decimal places.
b. Does the firm have positive or negative financial leverage? Briefly ex­plain.

Net sales Interest expense Income tax expense Preferred dividends Net income Average assets Average common stockholders' equity $1,500,000 120,000 80,000 25,000 130,000 1,100,000 400,000