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 company’s 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?

1.

Return on total assets

%

2.

Return on equity

%

3.

Financial Leverage