Financial data for Joel de Paris, Inc., for last year follow: The company paid d

Question

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

The company paid dividends of $211,200 last year. The “Investment in Buisson, S.A.,” 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?

Joel de Paris, Inc.
Balance Sheet Beginning
Balance Ending
Balance Assets Cash $ 127,000 $ 127,000 Accounts receivable 339,000 473,000 Inventory 565,000 477,000 Plant and equipment, net 879,000 873,000 Investment in Buisson, S.A. 392,000 433,000 Land (undeveloped) 249,000 252,000 Total assets $ 2,551,000 $ 2,635,000 Liabilities and Stockholders' Equity Accounts payable $ 388,000 $ 344,000 Long-term debt 1,030,000 1,030,000 Stockholders' equity 1,133,000 1,261,000 Total liabilities and stockholders' equity $ 2,551,000 $ 2,635,000

Explanation / Answer

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1. Average Operating Assets It does not include investment in other company or underdeveloped land Beginning Ending Cash 127000 127000 Accounts Receivable 339000 473000 Inventory 565000 477000 Plant and Equipment (Net) 879000 873000 Total Operating Assets 1910000 1950000 Average Operating Asset (1910000+1950000)/2 Average Operating Asset 1930000 2. Margin Net Operating Income/Sale 656200/3860000 Net Operating Income/Sale 17% 2. Turnover Sales/Average Operating asset 3860000/1930000 Sales/Average Operating asset 2 2. ROI Margin*Turnover 2*17% 34% 3. Residual Income Net Operating Income 656200 Less: Minimum Required Return -289500 (15%*1930000) Residual Income 366700

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