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Profitability ratios, trading on the equity

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Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:

Net sales

$1,500,000

Interest expense

120,000

Income tax expense

80,000

Preferred dividends

25,000

Net income

130,000

Average assets

1,100,000

Average common stockholders' equity

400,000

 

  1. Compute the profit margin on sales and the rates of return on assets and common stockholders' equity, rounding calculations to two decimal places.
  2. Does the firm have positive or negative financial leverage? Briefly ex­plain.

 

Reference no: EM13491741

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