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 recervable 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 341,000 578,000 878,000 395,000 255,000 S 133,000131,000 471,000 472,000 896,000 433,000 255,000 2,580,000 2,658,000 1,049,000 1,158,000 $ 373,000334,000 1,049,000 1275 000 $ 2,580,000 2,658,000

Explanation / Answer

SOLUTION

(A) Average operating assets-

Operating assets doesnot include investments in other companies or in undeveloped land.

Average operating assets = (Ending balance + beginning balance) / 2

= ($1,970,000 + $1,930,000) / 2

= $3,900,000 / 2 = $1,950,000

(B) Margin = Net Operating income / Sales

= $811,200 / $5,070,000 = 16%

Turnover = Sales / Average Operating assets

= $5,070,000 / $1,950,000 = 2.6

ROI = Margin * Turnover

= 16% * 2.6 = 41.6%

(C) Residual Income

Ending Balance ($) Beginning Balance ($) Cash 131,000 133,000 Accounts receivable 471,000 341,000 Inventory 472,000 578,000 Plant and Equipment 896,000 878,000 Total Operating assets 1,970,000 1,930,000

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