DVU Joel de Paris ROI and Residual Income Questions

Financialdata

for

Joel

de

Paris,

Incorporated,

for

last

year

follow:

de

Paris, IncorporatedBalance Sheet

Beginning BalanceEnding BalanceAssetsCash

Accounts receivable

Inventory

Plant and equipment, net

Investment in Buisson, S.A.

Land (undeveloped)

Total assets

Liabilities and Stockholders’ EquityAccounts payable

Long-term debt

996,000

Stockholders’ equity

Total liabilities and stockholders’ equity$ 2,563,000$ 2,640,000

Joel
$ 140,000	$ 130,000
341,000	485,000
566,000	480,000
873,000	865,000
391,000	430,000
252,000	250,000
	$ 2,563,000		$ 2,640,000
$ 389,000	$ 343,000
	996,000
1,178,000	1,301,000

Sales

Operating expenses

Net operating income

Interest and taxes:Interest expense

Tax expense

Net income

Joel de Paris, IncorporatedIncome Statement
$ 4,850,000
4,171,000
679,000
$ 128,000
192,000	320,000
$ 359,000

The company paid dividends of $236,000 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 “Margin”, “Turnover” and “ROI” to 2 decimal places.)

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