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 $ 138,000 $ 128,000 Accounts receivable 340,000 478,000 Inventory 561,000 487,000 Plant and equipment, net 841,000 827,000 Investment in Buisson, S.A. 405,000 425,000 Land (undeveloped) 249,000 249,000 Total assets $ 2,534,000 $ 2,594,000 Liabilities and Stockholders' Equity Accounts payable $ 386,000 $ 333,000 Long-term debt 961,000 961,000 Stockholders' equity 1,187,000 1,300,000 Total liabilities and stockholders' equity $ 2,534,000 $ 2,594,000 Joel de Paris, Inc. Income Statement Sales $ 4,940,000 Operating expenses 4,347,200 Net operating income 592,800 Interest and taxes: Interest expense $ 120,000 Tax expense 210,000 330,000 Net income $ 262,800 The company paid dividends of $149,800 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?

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 Land (undeveloped) Total assets $138,000 128,000 478,000 487,000 827,000 425,000 249,000 $2,534,000 2,594,000 340,000 561,000 841,000 405,000 249,000 , S.A Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $386,000 333,000 961,000 1,187,0001,300,000 $2,534,000 2,594,000 961,000 Joel de Paris, Inc Income Statement Sales Operating expenses Net operating income Interest and taxes: 4,940,000 4,347,200 592,800 120,000 210,000330,000 nterest expense Tax expense Net income 262,800

Explanation / Answer

1 Beginning operating assets=2534000-405000-249000= 1880000 Ending operating assets=2594000-425000-249000= 1920000 Average operating assets = (1880000+1920000)/2= 1900000 1 Margin = Net operating incom/Sales=592800/4940000= 12% Turnover = Sales/Average operating assets=4940000/1900000= 2.6 ROI = Margin*Turnover =12%*2.6= 31.20% 2 Residual income=592800-(1900000*15%)= 307800

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