Problem - Measures of Performance and Financial Leverage
Following are selected data from year-end financial statements of Nelox Corporation for 2014 and 2013.
|
|
2014
|
2013
|
|
Total Assets
|
7,349,000
|
6,553,000
|
|
Interest Expenses
|
115,000
|
102,000
|
|
Long-term liabilities
|
1,220,000
|
1,239,000
|
|
Net Income
|
619,000
|
563,000
|
|
Sales
|
8,196,000
|
6,996,000
|
|
Stockerholder's Equity
|
3,624,000
|
3,221,000
|
Required -
a. Compute the following performance measurement ratios for 2014. (Round computations to three decimal places and ignore income taxes.)
1. Asset turnover
2. Return on sales
3. Return on assets
4. Return on equity
b. Is Nelox Company using financial leverage? If so, is the leverage favorable or unfavorable? Explain.