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 $ 126,000 $ 136,000 Accounts receivable 347,000 487,000 Inventory 576,000 481,000 Plant and equipment, net 841,000 826,000 Investment in Buisson, S.A. 394,000 427,000 Land (undeveloped) 252,000 251,000 Total assets $ 2,536,000 $ 2,608,000 Liabilities and Stockholders' Equity Accounts payable $ 383,000 $ 348,000 Long-term debt 951,000 951,000 Stockholders' equity 1,202,000 1,309,000 Total liabilities and stockholders' equity $ 2,536,000 $ 2,608,000 Joel de Paris, Inc. Income Statement Sales $ 3,820,000 Operating expenses 3,208,800 Net operating income 611,200 Interest and taxes: Interest expense 126,000 Tax expense 208,000 334,000 Net income $ 277,200
The company paid dividends of $170,200 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 answers to 1 decimal place.) 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 15%. 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 $ 126,000 $ 136,000 Accounts receivable 347,000 487,000 Inventory 576,000 481,000 Plant and equipment, net 841,000 826,000 Investment in Buisson, S.A. 394,000 427,000 Land (undeveloped) 252,000 251,000 Total assets $ 2,536,000 $ 2,608,000 Liabilities and Stockholders' Equity Accounts payable $ 383,000 $ 348,000 Long-term debt 951,000 951,000 Stockholders' equity 1,202,000 1,309,000 Total liabilities and stockholders' equity $ 2,536,000 $ 2,608,000 Joel de Paris, Inc. Income Statement Sales $ 3,820,000 Operating expenses 3,208,800 Net operating income 611,200 Interest and taxes: Interest expense 126,000 Tax expense 208,000 334,000 Net income $ 277,200
The company paid dividends of $170,200 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 answers to 1 decimal place.) 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 15%. 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 $ 126,000 $ 136,000 Accounts receivable 347,000 487,000 Inventory 576,000 481,000 Plant and equipment, net 841,000 826,000 Investment in Buisson, S.A. 394,000 427,000 Land (undeveloped) 252,000 251,000 Total assets $ 2,536,000 $ 2,608,000 Liabilities and Stockholders' Equity Accounts payable $ 383,000 $ 348,000 Long-term debt 951,000 951,000 Stockholders' equity 1,202,000 1,309,000 Total liabilities and stockholders' equity $ 2,536,000 $ 2,608,000 Joel de Paris, Inc. Income Statement Sales $ 3,820,000 Operating expenses 3,208,800 Net operating income 611,200 Interest and taxes: Interest expense 126,000 Tax expense 208,000 334,000 Net income $ 277,200
The company paid dividends of $170,200 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 answers to 1 decimal place.) 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 15%. What was the company’s residual income last year?

Explanation / Answer

Beginning operating assets=2536000-394000-252000= 1890000 Ending operating assets=2608000-427000-251000= 1930000 Average operating assets=(1890000+1930000)/2= 1910000 1 Company’s margin=Net operating income/Sales=611200/3820000= 16% Turnover = Sales/Average operating assets = 3820000/1910000= 2 ROI = Margin*Turnover = 16%*2 = 32% 2 Residual income =611200-(1910000*15%)= 324700

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