Return Ratios and Leverage The following selected data are taken from the financial statements of Evergreen Company: Sales revenue $672,000 399,000 Cost of goods sold Gross profit Selling and administrative expense $273,000 100,000 $173,000 Operating income Interest expense 50,000 Income before tax $123,000 Income tax expense (40%) 49,200 Net income $73,800 Accounts payable Accrued liabilities Income taxes payable Interest payable Short-term loans payable $45,000 70,000 10,000 25,000 150,000 $300,000 Total current liabilities Long-term bonds payable $500,000 Preferred stock, 10%, $100 par Common stock, no par Retained earnings $250,000 600,000 350,000 $1,200,000 Total stockholders' equity Total liabilities and stockholders' equity $2,000,000 Required: 1. Compute the following ratios for Evergreen Company: a. Return on sales b. Asset turnover (Assume that total assets at the beginning of the year were $1,600,000.) c. Return on assets d. Return on common stockholders' equity (Assume that the only changes in stockholders' equity during the year were from the net income for the year and dividends on the preferred stock.) When computing percentage amounts, carry out calculations to four decimal places, but enter your answers to two decimal places; for example, .17856 rounds to .1786 and would be entered as 17.86. a. Return on sales 15.45 % b. Asset turnover (round to 2 decimal places) 0.42 X times c. Return on assets 6.49 X % d. Return on common stockholders' equity 4.88 X % 2. Comment on Evergreen's use of leverage. Has it successfully employed leverage? No, Evergreen has not successfully employed leverage because; the return on the stockholders funds is less than the return to all the providers of capital