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 receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets 132,000 480,000 479,000 869,000 429,000 254,000 $2,568,000 $ 2,643,000 128,000 $ 342,000 563,000 887,000 398,000 250,000 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity 375,000 $ 999,000 331,000 999,000 1,313,000 $2,568,000 $2,643,000 1,194,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes $ 5,238,000 4,347,540 890,460 Interest expense Tax expense 120,000 197,000 317,000 $573,460 Net income

Explanation / Answer

1) Margin = net operating income/sales Turnover = sales/average operating assets ROI          = margin * turnover Margin 17.0% turnover 2.7 ROI 45.9% total operating assets don't include investments in other companies or in undeveloped land ending Beginning balances balances Cash 128,000 132,000 account receivable 342,000 480,000 inventory 563,000 479,000 plant and equipment,net 887,000 869,000 total Assets 1,920,000 1,960,000 Average operating assets = ( ending balances + beginning balances )/2 (1,920,000+1,960,000)/2 1940000 2) Net operating income 890,460 minimum required return 21% residual income 483060 Residual income =net operating income - (average operating assets *min required return)

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