Question

uulu Tui Juciu. UITS, "II., IUI use your run . 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 Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $ 138,000 331,000 567,000 874,000 397,000 250,000 $ 2,557,000 $ 138,000 471,000 486,000 855,000 435,000 245,000 $ 2,630,000 $ 379,000 991, 000 1,187,000 $ 2,557,000 $ 347,000 991,000 1,292,000 $2,630,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense $ 122,000 Tax expense 210,000 Net income $ 3,860,000 3,203,800 656,200 332,000 324, 200 $

Answer 1

Average operating assets = [(2,557,000-250,000-397,000)+(2,630,000-245,000-435,000)]/2 = 1,930,000

Margin = Net operating income /sales = 656,200/3,860,000 = 17% Turnover = Sales /Average operating assets = 3,860,000/1,930,000 = 2 ROI = Margin * Turnover = 17*2 = 34%

Residual income = Net operating income - Required return = 656,200 - (1,930,000*15%) = 366,700