Question
Problem 10-15 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] Financial data for Joel de Paris, Inc., for last year, follow: Joel de Paris,
Problem 10-15 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2]
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 companys margin, turnover, and return on investment (ROI) for last year. (Round "Turnover" to 1 decimal place.)
3. What was the companys residual income last year?
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