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 Ending Balance Balance Assets Cash Accounts receivable S 127,000 S 135,000 490,000 471,000 834.000 427.000 246,000 336,000 563.000 864.000 399.000 250,000 Plant and equipment, net Investment in Buisson, S.A Land (undeveloped) Total assets S2,539,000 S2,603,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity S 370,000 S 340,000 994.000 1,175,000 1,269,000 994.000 Total liabilities and stockholders' equity 2,539,000 S2,603,000 Joel de Paris, Inc Income Statement Sales Operating expenses S 4,584,000 3,896,400 687,600 Net operating income Interest and taxes Interest expense Tax expense 118,000 192,000 310.000 Net income S 377,600 The company paid dividends of S283,600 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round your Turnover answer to 1 decimal place. Round your Margin and ROI percentage answers to 1 decimal place (i.e 0.123 should be entered as 12.3.)) Margin Tumover ROI 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 22%. What was the company's residual income last year? Net operating income Minimum required return Residual income

Explanation / Answer

                                                        Joel De Paris

                                                                Ending Balance                  Beginning Balance

Cash                                                      135000                                  127000

Account receivable                         490000                                  336000

Inventory                                               471000                                  563000

Plant & Equipment (net)             834000                                  864000

Total Operating Assets                 1930000                                1890000

Average operating Assets = 1930000 + 1890000 = 1910000

                                                           2           

Margin = Net Operating income/ Sales = 687600/4584000 = 15%

Turn Over = Sales/ Average operating assets = 4584000/1910000 = 2.4

ROI = Margin x Turn Over = 15% x 2.4 = 36%

2. Net Operating income                                               687600

     Minimum required return(22% x 1910000)    420200

     Residual Income                                                         267400

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