Question
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris,
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2]
Financial data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc. Balance Sheet | ||||||
Beginning Balance | Ending Balance | |||||
Assets | ||||||
Cash | $ | 133,000 | $ | 134,000 | ||
Accounts receivable | 337,000 | 475,000 | ||||
Inventory | 572,000 | 472,000 | ||||
Plant and equipment, net | 858,000 | 859,000 | ||||
Investment in Buisson, S.A. | 393,000 | 426,000 | ||||
Land (undeveloped) | 246,000 | 253,000 | ||||
Total assets | $ | 2,539,000 | $ | 2,619,000 | ||
Liabilities and Stockholders' Equity | ||||||
Accounts payable | $ | 374,000 | $ | 342,000 | ||
Long-term debt | 1,035,000 | 1,035,000 | ||||
Stockholders' equity | 1,130,000 | 1,242,000 | ||||
Total liabilities and stockholders' equity | $ | 2,539,000 | $ | 2,619,000 | ||
Joel de Paris, Inc. Income Statement | |||||||||
Sales | $ | 3,840,000 | |||||||
Operating expenses | 3,187,200 | ||||||||
Net operating income | 652,800 | ||||||||
Interest and taxes: | |||||||||
Interest expense | $ | 117,000 | |||||||
Tax expense | 207,000 | 324,000 | |||||||
Net income | $ | 328,800 | |||||||
The company paid dividends of $216,800 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 "Margin", "Turnover" and "ROI" to 2 decimal places.)
3. What was the companys residual income last year?
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