CH 13 ex #9

Selected financial data from the June 30 year-end statements of Safford Company are given below:

Total assets	$	5,600,000
Long-term debt (12% interest rate)		$590,000
Total stockholders equity	$	3,000,000
Interest paid on long-term debt		$70,800
Net income		$390,000

Total assets at the beginning of the year were $5,400,000; total stockholders equity was $2,800,000. The companys tax rate is 35%.

Required:

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

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

c.

Is financial leverage positive or negative?

	Positive
	Negative