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 $ 135,000 $ 132,000 Accounts receivable 347,000 475,000 Inventory 570,000 488,000 Plant and equipment, net 848,000 845,000 Investment in Buisson, S.A. 399,000 433,000 Land (undeveloped) 245,000 255,000 Total assets $ 2,544,000 $ 2,628,000 Liabilities and Stockholders' Equity Accounts payable $ 370,000 $ 332,000 Long-term debt 1,006,000 1,006,000 Stockholders' equity 1,168,000 1,290,000 Total liabilities and stockholders' equity $ 2,544,000 $ 2,628,000 Joel de Paris, Inc. Income Statement Sales $ 5,184,000 Operating expenses 4,510,080 Net operating income 673,920 Interest and taxes: Interest expense $ 114,000 Tax expense 201,000 315,000 Net income $ 358,920 The company paid dividends of $236,920 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.

Explanation / Answer

Calculation of co.'s margin and ROI: Margin Net operating margin Net operating income/sales 673920/5184000 13.00% Net peofit margin 358920/5184000 6.92% Net peofit margin after dividend (358920-236920)/5184000 2.35% Turnover Sales 5184000 ROI Net operating income 673920 Total net income A 673920 Co.'s investment B 1006000+1290000 2296000 ROI A/B*100 29.35% Calculation of Residual Income: Net operating income A 673920 Minimum required return B 20% Total investment C 1006000+1290000 2296000 Minimum required return D= C*B 459200 Residual income E= A-D 214720

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