Reference no: EM13975195
INTERMEDIATE 9. 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
Fixed assets 2,200,000
Total assets $4,000,000
Current liabilities $ 600,000
Long-term debt 1,000,000
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?
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: INTERMEDIATE 9. Gulf Controls, Inc., has a net profit margin of 10 percent and earnings after taxes of $600,000. Its current balance sheet follows: Compare Gulf Controls with the average firm in the industry. What is the source of the major differenc..
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