Digital Relay has both preferred and common stock outstanding. The company reported the following information for 20X7:
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Net sales
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$1,750,000
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Interest expense
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120,000
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Income tax expense
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80,000
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Preferred dividends
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25,000
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Net income
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130,000
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Average assets
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1,200,000
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Average common stockholders' equity
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500,000
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Compute the profit margin on sales ratio, the return on equity and the return on assets, rounding calculations to two decimal places.
Does the firm have positive or negative financial leverage? Briefly explain.