Question

Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity 126,000 333,000 573,000 808,000 398,000 249,000 2,487,000 130,000 481,000 479,000 790,000 425,000 249,000 2,554,000 $ $ 385,000 1,006,000 1,096,000 $ 2,487,000 $ 336,000 1,006,000 1,212,000 $2,554,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense $ 113,000 Tax expense 200,000 Net income $ 5,022,000 4,369, 140 652,860 313,000 339,860 $ The comnanunaid dhadond o

Answer 1

1)	Average operating assets			1860000
2)	Margin = net operating income/sales
	Turnover = sales/average operating assets
	ROI          = margin * turnover
	Margin		13.0%
	turnover		2.70
	ROI		35.1%
	total operating assets don't include investments in other companies or in undeveloped
	land
					ending	Beginning
					balances	balances
	Cash				130,000	126,000
	account receivable				481,000	333,000
	inventory				479,000	573,000
	plant and equipment,net				790,000	808,000
	total Assets				1,880,000	1,840,000
	Average operating assets = ( ending balances + beginning balances )/2
				(1,880,000+1,840,000)/2
				1860000
3)	Net operating income				652,860
	minimum required return				15%
	residual income				373860	answer
	Residual income =net operating income - (average operating assets *min required return)