Return Ratios and Leverage The following selected data are taken from the financial statements of Redwood Enterprises: Sales revenue Cost of goods sold Gross profit Selling and administrative expense $642,000 374,000 $268,000 Operating income Interest expense 100,000 $168,000 50,000 Income before tax $118,000 Income tax expense (40%) 47,200 Net income $70,800 Accounts payable $45,000 Accrued liabilities Income taxes payable Interest payable Short-term loans payable 70,000 10,000 25,000 150,000 Total current liabilities $300,000 Long-term bonds payable $500,000 Preferred stock, 10%, $100 par $250,000 Common stock, no par 600,000 Retained earnings 350,000