Financial data for Joel de Paris, Inc., for last year follow: The company paid d
ID: 2465114 • Letter: F
Question
Financial data for Joel de Paris, Inc., for last year follow:
The company paid dividends of $156,800 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.
Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.)
The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 16%. What was the company’s residual income last year?
The company paid dividends of $156,800 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.
Joel de Paris, Inc.Balance Sheet Beginning
Balance Ending
Balance Assets Cash $ 132,000 $ 125,000 Accounts receivable 341,000 476,000 Inventory 579,000 478,000 Plant and equipment, net 868,000 881,000 Investment in Buisson, S.A. 390,000 434,000 Land (undeveloped) 247,000 248,000 Total assets $ 2,557,000 $ 2,642,000 Liabilities and Stockholders' Equity Accounts payable $ 382,000 $ 330,000 Long-term debt 1,000,000 1,000,000 Stockholders' equity 1,175,000 1,312,000 Total liabilities and stockholders' equity $ 2,557,000 $ 2,642,000
Explanation / Answer
OPERATING MARGIN
OPERATING INCOME=620,800
NET SALES=3,880,000
OPERATING INCOME/NET SALES
620800/3,880,000=0.16*100=16%
TURNOVER
NUMBER OF ITEMS SOLD=101,000
SALES=3,880,000
AVERAGE PRICE OF EACH ITEM=3,880,000/101,000=38.41
THE TURNOVER OF THE COMPANY IS 3,880,000
ROI
INVESTMENT=434,000 THE INVESTMENT WAS INCREASED BY 44,000
TOTAL INVESTMENT = TOTAL DEBT AND EQUITY=2642000
Net income=2938000
293800/2642000*100=11.12%
ROI on investment=44000/390000*100=11.28%
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