Calculate gilfs return on stockholders equity

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Reference no: EM131340010

Gulf Controls, Inc., has a net profit margin of 10 percent and earnings after taxes of $600,000. Its current balance sheet follows:

Current Assets

$ 1,800,000

Current liabilities

$ 600,000

Fixed assets

2,200,000

Long-term debt

1,000,000

Total Assets

$4,000,000

Common stock

500,000

 

 

Retained earnings

1,900,000

 

 

Total liabilities and Stockholder's equity

$ 4,000,000

 

 


a. Calculate Gilf's Return on stockholder's equity.

b. The industry average ratios are as follows:

  • Net Profit margin : 6%
  • Total asset turnover : 2.5 times
  • Equity multiplier : 1.4 times

Compare Gulf Controls with the average firm in the industry. What is the source of the major differences between the Gulf and the industry average ratios?

Reference no: EM131340010

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