5 214 points Exercise 16-9 (Static) Financial Ratios for Assessing Profitability and Managing Debt [LO16-4, LO16-5] The financial statements for Castile Products, Incorporated, are given below: Castile Products, Incorporated Balance Sheet December 31 Assets Current assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 10% Total liabilities Stockholders' equity: Common stock, $ 5 per value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 5,500 35,000 70,000 3,500 115,000 185,000 $ 300,000 $ 50,000 80,000 130,000 30,000 140,000 170,000 $ 300,000 Return to question Return to question 5 Castile Products, Incorporated Income Statement For the Year Ended December 31 Sales :15 420,000 214 Cost of goods sold 292,500 '_ Gross margin 127,500 90\"\" Selling and administrative expenses 89,500 Net operating income 38,000 Interest expense 8,000 Net income before taxes 30,000 Income taxes (30%) 9,000 Net income $ 21,000 Account balances at the beginning ofthe year were: accounts receivable, $25,000; and inventory, $60,000. All sales were on account. Assets at the beginning ofthe year totaled $280,000, and the stockholders' equity totaled $161,600. Required: Compute the following: 1. Gross margin percentage. Note: Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34). 2. Net profit margin percentage. Note: Round your answer to the nearest whole percentage place (i.e., 0.1234 should be entered as 12%). 3. Return on total assets. Note: Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3). 4. Return on equity. Note: 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? 9 Answer is complete but not entirely correct. 1. Gross margin percentage 30.36 a 2. Net prot margin percentage 3. Return on total assets 4. Return on equity 12.4 9 5. Financial Leverage _