Compare gulf controls with the average firm in the industry

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Reference no: EM13928904

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 stockholders' equity	$4,000,000

a. Calculate Gulf 's return on stockholders' 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: EM13928904

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