Problem - Return on Investment (ROI) end Residual Income
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
|
$133,000
|
|
Accounts receivable
|
334,000
|
471,000
|
|
Inventory
|
573,000
|
473,000
|
|
Plant and equipment, net
|
873,000
|
883,000
|
|
Investment in Buisson, S.A.
|
396,000
|
428,000
|
|
Land (undeveloped)
|
253,000
|
250,000
|
|
Total assets
|
$2,569,000
|
$2,638,000
|
|
Liabilities and Stockholders' Eqvity
|
|
|
|
Accounts payable
|
$374,000
|
$347,000
|
|
Long-tea debt
|
1,014,000
|
1,011,000
|
|
Stockholders' equity
|
1,181,000
|
1,277,000
|
|
Total liabilities and stockholders' equity
|
$2,569,000
|
$2,638,000
|
|
Joel de paris, Inc. Income Statement
|
|
Sales
|
|
$4,268,000
|
|
Operating expenses
|
|
3,499,760
|
|
Net operating income
|
|
768,240
|
|
Interest and taxes:
|
|
|
|
Interest expense
|
$129,000
|
|
|
Tax expense
|
208,000
|
337,000
|
|
Net income
|
|
$431,240
|
The company paid dividends of $335,240 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
3. What was the company's residual income last year?