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 Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A Land (undeveloped) Total assets $132,000 128,000 475,000 480,000 837,000 430,000 253,000 $ 2,524,000 2,603,000 335,000 569,000 844,000 395,000 249,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $378,000 337,000 988,000 1,278,000 $ 2,524,000 2,603,000 988,000 1,158,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: $5,130,000 4,309,200 820,800 Interest expense Tax expense 124,000 192,000 316,000 $ 504,800 Net income The company paid dividends of $384,800 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.)

Explanation / Answer

1 Beginning operating assets=2524000-395000-249000= $1880000 Ending operating assets=2603000-430000-253000= $1920000 Average operating assets=(1880000+1920000)/2=$1900000 2 Margin=Net operating income/Sales=820800/5130000= 16% Turnover=Sales/Average operating assets=5130000/1900000= 2.7 ROI=Margin*Turnover=16%*2.7= 43.2% 3 Residual income=820800-(1900000*15%)= $535800

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