Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc

Question

Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance AssetS Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets $ 140,000 $ 130,000 488,000 479,000 843,000 433,000 251,000 $2,552,000 $2,624,000 349,000 566,000 845,000 402,000 250,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $ 374,000 $ 338,000 964,000 1,214,000 1,322,000 964,000 $2,552,000 $2,624,000 Joel de Paris, Inc. Income Statement Sales Operating expenses $4,416,000 3,753,600 operating income Interest and taxes: 662,400 Interest expense Tax expense_210,000 $117,000 327,000 $ 335,400 Net income The company paid dividends of $227,400 last year. The “Investment in Buisson, SA.," on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company's residual income last year? Average operating assets 2. Margin Turnover ROI 3. Residual income

Explanation / Answer

1 Beginning operating assets = 2552000-402000-250000= $1900000 Ending operating assets = 2624000-433000-251000= $1940000 Average operating assets = (1900000+1940000)/2= $1920000 2 Margin = Net operating income/Sales = 662400/4416000= 15% Turnover = Sales/ Average operating assets = 4416000/1920000= 2.3 ROI = Margin*Turnover = 15%*2.3= 34.5% 3 Residual income = 662400-(1920000*15%)= $374400

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