Question

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

Joel de Paris, Inc. Balance Sheet
	Beginning Balance			Ending Balance
Assets
Cash	$	140,000		$	120,000
Accounts receivable		450,000			530,000
Inventory		320,000			380,000
Plant and equipment, net		680,000			620,000
Investment in Buisson, S.A.		250,000			280,000
Land (undeveloped)		180,000			170,000
Total assets	$	2,020,000		$	2,100,000
Liabilities and Stockholders' Equity
Accounts payable	$	360,000		$	310,000
Long-term debt		1,500,000			1,500,000
Stockholders' equity		160,000			290,000
Total liabilities and stockholders' equity	$	2,020,000		$	2,100,000

Joel de Paris, Inc. Income Statement
Sales					$	4,050,000
Operating expenses						3,645,000
Net operating income						405,000
Interest and taxes:
Interest expense	$	150,000
Tax expense		110,000				260,000
Net income					$	145,000

The company paid dividends of $15,000 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 "Turnover" to 1 decimal place.)

3. What was the company’s residual income last year?

Answer 1

Answers Average Operating Assets Margin Assets Turnover ratio : ROI Residual Income 1620000 10.00% 2.50 25.00% 162000 Cash Accounts Receivables Inventory Plant and Equipment Total Operating Assets Question - 1 Average Operating Assets Beginning Ending 140000 120000 450000 530000 320000 380000 680000 620000 1590000 1650000 1620000 Sales Average Opearating Assets Net operating income Minimum Required Rate of Return DATA 4050000 1620000 405000 15.00%

Question -2 Margin : Net operating Income / Net sales Net operating income 405000 Sales 4050000 Margin 10.00% Jets Turnover ration: Netsales Average Opearating Ass Sales 4050000 Average Opearating Assets 1620000 Assets Turnover ratio : 2.50 ROI : Margin * Asset Turnover ratio Margin 10.00% Assets Turnover ratio : ROI : Margin * Asset Turnover ratio 25.00% Question - 3 Residual Income Average Operating Assets 1620000 Minimum Required Rate of Return 15% Minimum Required Return 243000 Net Operating income 405000 Residual income 162000 2.5