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 $135,000 129, 000 490,000 488,000 B03, 000 425,000 245, 000254, 000 2,523,000 2,589,000 337,000 568,000 830,000 408,000 Liabilities and Stockholders Equity Accounts payable Long-term debt Stockholders' equity $ 385,000 335, 000 988, 000 1,150,000, 266,000 2,523,000 2,589,000 988, 000 Total liabilities and stockholdr' equity Joel de Paris, Inc. Income Statement Sales Operating expenses S4,725,000 3,874,500 850,500 et operating income Interest and taxes: Interest expense 115, 000 192, 000307,000 Tax expense Net income $543,500 The company paid dividends of $427,500 last year. The "nvestment in Bulsson, 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? 1. Average operating assets 2. Margin Turnover ROI 3. Residual income

Explanation / Answer

1 Beginning operating assets = 2523000-408000-245000= 1870000 Ending operating assets = 2589000-425000-254000= 1910000 Average operating assets = (1870000+1910000)/2= 1890000 2 Margin = net operating income/Sales = 850500/4725000= 18% Turnover = Sales/Average operating assets = 4725000/1890000= 2.5 ROI = Margin*Turnover = 18%*2.5= 45% 3 Residual income = 850500-(1890000*15%)= 567000

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