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 as Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets $ 135,000 127,000 483, 000 481,000 849,000 432,000 251,000 $ 2,537,000 2,623,000 344,000 570,000 851,000 391,000 246,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total 1iabilities and stockholders' equity $ 374,000 343,000 1,034,000 1,129,000 1,246 000 $2,537,000 2,623,000 1, 034,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: $4,032,000 3,467,520 64,480 s 117,000 Interest expense Tax expense 206,000323,000 $ 241,48 Net income The company paid dividends of $124,480 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? 1. Average operating assets 2. Margin Turnover ROI 3. Residual income

Explanation / Answer

1 Beginning operating assets = 2537000-391000-246000= 1900000 Ending operating assets = 2623000-432000-251000= 1940000 Average operating assets = (1900000+1940000)/2= 1920000 2 Margin = Net operating income/Sales = 564480/4032000= 14% Turnover = Sales/Average operating assets = 4032000/1920000= 2.1 ROI = Margin*Turnover = 14%*2.1= 29.40% 3 Residual income = 564480-(1920000*15%)= 276480

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