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 Ending Balance Balance Cash Accounts receivable $ 134,000 S 135,000 340,000 482,000 562,000 485,000 804,000 778,000 391,000 426,000 247,000 250,000 Plant and equipment, net Investment in Buisson, SA Land (undeveloped) Total assets $2,478,000 $2,556,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity $ 387,000 $ 338,000 978,000 978,000 1,113,000 1,240,000 Total liabilities and stockholders' equity $2,478,000 $2,556,000 Joel de Paris, Inc. Income Statement Sales Operating expenses 4,092,000 3.478,200 613,800 Net operating income Interest and taxes: Interest expense Tax expense 112,000 92,000 304,000 Net income $ 309,800

Explanation / Answer

Solutio.

A.

Margin = Net opereting income / Sales

= $309,800 / $4,092,000 = 7.57%

Turnover :-

Operating Assets Turn over Ratio:

=( Sales / Average Operating Aseets)

=($4,092,000 / 2,517,000)

=1.62 Times .

Return on investment :-

Return on Investment = Operating Income / Total Assets.

= $309,800 / $2,478,000 = 12.50%

2. Residual Income

Residual Income (RI) = A (B × C)

= $309,800 - ( 0.16 x 2,517,000 )

= $92,920

A = Net operating income;

B = Minimum required return on assets; and
C = Average operating assets

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