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Selected financial data from the June 30 year-end statements of Safford Company are given below:
| |
| Total assets | $ | 3,600,000 |
| Long-term debt (12% interest rate) | $ | 500,000 |
| Total stockholders equity | $ | 2,400,000 |
| Interest paid on long-term debt | $ | 60,000 |
| Net income | $ | 280,000 |
| |
Total assets at the beginning of the year were $3,000,000; total stockholders equity was $2,200,000. The companys tax rate is 30%.
Required:
1. Compute the return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
2. Compute the return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
3. Is financial leverage positive or negative?
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