Calculate gilfs return on stockholders equity

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Reference no: EM131340010

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 Stockholder's equity	$ 4,000,000
		Total liabilities and Stockholder's equity	$ 4,000,000

a. Calculate Gilf's Return on stockholder's 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: EM131340010

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