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

Transcribed Image Text:

Selected financial data from the June 30 year-end statements of Safford Company are given below: Total assets Long term debt (12% interest rate) Total stockholders' equity Interest paid on long-term debt Net income $ 5,500,000 $730,000 $ 2,300,000 $ 87,600 $370,000 Total assets at the beginning of the year were $5.300.000; total stockholders' equity was $2,100,000. The company's tax rate is 35%. Required: 1. Compute the return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 2. Compute the return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 3. Is financial leverage positive or negative? 1. Return on total assets 2 Refum on equity 3 Financial Leverage, Selected financial data from the June 30 year-end statements of Safford Company are given below: Total assets Long term debt (12% interest rate) Total stockholders' equity Interest paid on long-term debt Net income $ 5,500,000 $730,000 $ 2,300,000 $ 87,600 $370,000 Total assets at the beginning of the year were $5.300.000; total stockholders' equity was $2,100,000. The company's tax rate is 35%. Required: 1. Compute the return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 2. Compute the return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 3. Is financial leverage positive or negative? 1. Return on total assets 2 Refum on equity 3 Financial Leverage,

Answer rating: 100% (QA)

To determine if the financial leverage is positive or negative we can calculate the return ... View the full answer