Question

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

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

 Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash \$ 135,000 \$ 131,000 Accounts receivable 335,000 477,000 Inventory 561,000 484,000 Plant and equipment, net 859,000 838,000 Investment in Buisson, S.A. 409,000 426,000 Land (undeveloped) 255,000 247,000 Total assets \$ 2,554,000 \$ 2,603,000 Liabilities and Stockholders' Equity Accounts payable \$ 385,000 \$ 344,000 Long-term debt 952,000 952,000 Stockholders' equity 1,217,000 1,307,000 Total liabilities and stockholders' equity \$ 2,554,000 \$ 2,603,000

 Joel de Paris, Inc. Income Statement Sales \$ 4,584,000 Operating expenses 3,758,880 Net operating income 825,120 Interest and taxes: Interest expense \$ 126,000 Tax expense 192,000 318,000 Net income \$ 507,120

The company paid dividends of \$417,120 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?

 1 Beginning operating assets = 2554000-409000-255000= \$1890000 Ending operating assets = 2603000-426000-247000= \$1930000 Average operating assets = (1890000+1930000)/2 = \$1910000 2 Margin = Net operating income /Sales = 825120/4584000= 18% Turnover = Sales/Average operating assets = 4584000/1910000= 2.4 Return on investment (ROI) = Margin*Turnover = 18%*2.4= 43.2% 3 Residual income = Net operating income-Minimum required return Residual income = 825120-(1910000*15%)= \$538620

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