Question

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

Joel de Paris, Inc. Balance Sheet
	Beginning Balance		Ending Balance
Assets
Cash	$	136,000	$	126,000
Accounts receivable		337,000		482,000
Inventory		577,000		472,000
Plant and equipment, net		820,000		830,000
Investment in Buisson, S.A.		407,000		432,000
Land (undeveloped)		250,000		247,000
Total assets	$	2,527,000	$	2,589,000
Liabilities and Stockholders' Equity
Accounts payable	$	370,000	$	334,000
Long-term debt		1,036,000		1,036,000
Stockholders' equity		1,121,000		1,219,000
Total liabilities and stockholders' equity	$	2,527,000	$	2,589,000

   

Joel de Paris, Inc. Income Statement
Sales		$	3,780,000
Operating expenses			3,288,600
Net operating income			491,400
Interest and taxes:
Interest expense	125,000
Tax expense	202,000		327,000
Net income		$	164,400

The company paid dividends of $66,400 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.)

Answer 1

1) margin = Net operating income / Sales

= 491,400 / 3,780,000

= 13%

2) turnover ratio =  Sales / Average operating assets

= 3,780,000 / 1890000

= 2

Beginning Ending

Cash	$	136,000	$	126,000
Accounts receivable		337,000		482,000
Inventory		577,000		472,000
Plant and equipment, net		820,000		830,000

Total    1870000 1910000

Average operating assets = [1870000 + 1910000 ]/ 2

= $1890000

3) ROI =  margin *  turnover

= 13% * 2

= 26%