Financial data for Joel de Paris, Inc., for last year follow: The company paid d

Question

Financial data for Joel de Paris, Inc., for last year follow:

The company paid dividends of $314,300 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?

Joel de Paris, Inc.
Balance Sheet Beginning
Balance Ending
Balance Assets Cash $ 130,000 $ 128,000 Accounts receivable 332,000 481,000 Inventory 571,000 484,000 Plant and equipment, net 817,000 797,000 Investment in Buisson, S.A. 405,000 427,000 Land (undeveloped) 255,000 249,000 Total assets $ 2,510,000 $ 2,566,000 Liabilities and Stockholders' Equity Accounts payable $ 376,000 $ 334,000 Long-term debt 1,007,000 1,007,000 Stockholders' equity 1,127,000 1,225,000 Total liabilities and stockholders' equity $ 2,510,000 $ 2,566,000 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 130,000 332,000 571,000 817,000 405,000 255, 000 2,510,000 128,000 481,000 484,000 797,000 427,000 249,000 2,566,000 Liabilities and Stockholders' Equity Accounts Long-term debt Stockholders' equity Total 1iabilities and stockholders' equity payable 376,000 1,007,000 1,127,000 2,510,000 334,000 1,007,000 1,225,000 2,566,000 Joel de Paris, Inc Income Statement Sales Operating expenses Net operating income Interest and taxes: 4,862,000 .132,700 729,300 Interest expense Tax expense 117,000 200.000317,000 Net income 412,300 The company paid dividends of $314,300 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%.

Explanation / Answer

1 Beginning operating assets = 2510000-405000-255000= 1850000 Ending operating assets = 2566000-427000-249000= 1890000 Average operating assets = (1850000+1890000)/2= 1870000 2 Margin = Net operating income /Sales = 729300/4862000= 15% Turnover = Sales/Average operating assets = 4862000/1870000= 2.6 ROI = Margin*Turnover = 15%*2.6= 39% 3 Residual income=729300-(1870000*15%)= 448800

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