Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc
ID: 2532400 • Letter: F
Question
Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc Balance Sheet Beginning Balance Ending Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A Land (undeveloped) Total assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $ 132,000 127,000 478,000 482,000 793,000 431,000 255,000 $ 2,489,000 2,566,000 339,000 563,000 806,000 397,000 252,000 $ 388,000 347,000 991,000 1,110,0001,228,000 $ 2,489,000 2,566,000 991,000 Joel de Paris, Inc Income Statement Sales Operating expenses Net operating income Interest and taxes: $ 5,022,000 4,168,260 853,740 S 127,000 Interest expense Tax expense 208,000335,000 $ 518,740 Net incomeExplanation / Answer
Answer:
1
Operating assets do not include investments in other companies or in undeveloped land
Computation of the average operating assets
Ending
Balances
Beginning
Balances
Cash
132000
127000
Account recivable
339000
478000
Inventory
563000
482000
Plant and equipment (net)
806000
793000
Total operating assets
1840000
1880000
Average operating assets
=1840000+1880000/2
=1860000
Average operating assets =1860000
_______________________________________________
Margin
=net operating income / sales
=853740 /5022000
=0.1700 or 17%
___________________________________
Turnover
= Sales / Average operating assets
=5022000/1860000
=2.7
Turnover=2.7
______________________________________
ROI
= Margin × Turnover
=17% /2.7
=45.9%
_________________________
residual Income
Net operating income
853740
Minimum required return (15% × 1860,000)
279000
Residual income
574740
1
Average Operating assets
1860000
2
Margin
17%
Turnover
2.7
ROI
45.90%
3
Residual income
574740
Computation of the average operating assets
Ending
Balances
Beginning
Balances
Cash
132000
127000
Account recivable
339000
478000
Inventory
563000
482000
Plant and equipment (net)
806000
793000
Total operating assets
1840000
1880000
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