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 BeginningEnding Balance Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A Land (undeveloped) $ 137,000 $ 133,000 479,000 487,000 821,000 432,000 248,000 349,000 574,000 820,000 391,000 245,000 Total assets $2,516,000 $2,600,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity $ 376,000 S 345,000 1,011,000 1,011,000 1,129,000 1,244,000 Total liabilities and stockholders' equity $2,516,000 $2,600,000 Joel de Paris, Inc. Income Statement Sales Operating expenses $ 5,130,000 4,257,900 872,100 Net operating income Interest and taxes $111,000 Interest expense Tax expense 02,000 313,000 Net income S 559,100 The company paid dividends of $444,100 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company

Explanation / Answer

1a)Margin = Net Income /sales

= 559100/5130000

= .109 or 10.9%

**Average operating asset :[2516000+2600000]/2= 2558000

Turnover =sales /average operating asset

=5130000/2558000

= 2 times

ROI : Net income/average operating asset

= 559100/2558000

= .219 or 21.9%

b)Net operating income :559100

minimum required return =average operating asset *required rate

= 2558000*.15

= 383700

residual income = 559100-383700 = 175400

2)

company A:Margin = 407160/3132000=.13 or 13%

Turnover = 3132000/1740000=1.8

ROI =407160/1740000 = .234 or 23.4%

Company B:

ROI .051 165750verage operating asset

average operating asset = 165750/.051= $ 3250000

margin = 165750/975000= .17 or 17%

Turnover = 975000/3250000 = .30

company C:

Turnover 1.8 = sales / 2600000

sales = 2600000*1.8 = 4680000

net operating income = 4680000*4%= 187200

ROI = 187200/2600000= .072 or 7.2%

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