Homework SourseFinancial data for Joel de Paris Inc for last year follow So
| Financial data for Joel de Paris, Inc., for last year follow: |
Solution
Requirement – 1, company’s margin, turnover, and return on investment (ROI) for last year
Beginning Balances
Ending Balances
Cash
133,000
129,000
Accounts receivable
331,000
475,000
Inventory
565,000
485,000
Plant and equipment (net)
891,000
871,000
Total operating assets
19,20,000
19,60,000
Average operating assets = ($19,20,000 + 19,60,000) / 2 = 19,40,000
Company’s Margin = [ Net operating income / Sales ] x 100
= [ $680,940 / 52,38,000 ] x 100
= 13%
Company’s Turnover =Sales / Average operating assets
= $52,38,000 / 19,40,000
= 2.70
Company’s ROI = Margin × Turnover = 13% x 2.70 = 35.1%
Requirement – 2, Company’s residual income last year
Net operating income
$680,940
Less : Minimum required return
($19,40,000 x 15%)
291,000
Residual income
$389,940
| Beginning Balances | Ending Balances | |
| Cash | 133,000 | 129,000 |
| Accounts receivable | 331,000 | 475,000 |
| Inventory | 565,000 | 485,000 |
| Plant and equipment (net) | 891,000 | 871,000 |
| Total operating assets | 19,20,000 | 19,60,000 |
