Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 127,000 $ 138,000 Accounts receivable 334,000 472,000 Inventory 568,000 484,000 Plant and equipment, net 851,000 826,000 Investment in Buisson, S.A. 399,000 429,000 Land (undeveloped) 249,000 254,000 Total assets $ 2,528,000 $ 2,603,000 Liabilities and Stockholders' Equity Accounts payable $ 379,000 $ 345,000 Long-term debt 1,016,000 1,016,000 Stockholders' equity 1,133,000 1,242,000 Total liabilities and stockholders' equity $ 2,528,000 $ 2,603,000 Joel de Paris, Inc. Income Statement Sales $ 5,320,000 Operating expenses 4,628,400 Net operating income 691,600 Interest and taxes: Interest expense $ 125,000 Tax expense 201,000 326,000 Net income $ 365,600 The company paid dividends of $256,600 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. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 3. What was the company’s residual income last year? 1. Average operating assets 2. Margin % Turnover ROI % 3. Residual income

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 19P

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

Joel de Paris, Inc. Balance Sheet
	Beginning Balance		Ending Balance
Assets
Cash	$	127,000		$	138,000
Accounts receivable		334,000			472,000
Inventory		568,000			484,000
Plant and equipment, net		851,000			826,000
Investment in Buisson, S.A.		399,000			429,000
Land (undeveloped)		249,000			254,000
Total assets	$	2,528,000		$	2,603,000
Liabilities and Stockholders' Equity
Accounts payable	$	379,000		$	345,000
Long-term debt		1,016,000			1,016,000
Stockholders' equity		1,133,000			1,242,000
Total liabilities and stockholders' equity	$	2,528,000		$	2,603,000

Joel de Paris, Inc. Income Statement
Sales			$	5,320,000
Operating expenses				4,628,400
Net operating income				691,600
Interest and taxes:
Interest expense	$	125,000
Tax expense		201,000		326,000
Net income			$	365,600

The company paid dividends of $256,600 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. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

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


1.	Average operating assets
2.	Margin	%
	Turnover
	ROI	%
3.	Residual income

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