The company paid dividends of $238,320 last year. The “Investment in Buisson, S.
ID: 2459745 • Letter: T
Question
The company paid dividends of $238,320 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company.
Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.)
MARGIN ________ %
ROI ________ %
The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 19%. What was the company’s residual income last year?
minimum required return $__________
residual income $___________
Financial data for Joel de Paris, Inc., for last year follow:Explanation / Answer
Net operating margin = Net operating income/sales = $ 342,320/$ 4,202,000 = 8% Return on investments = Net operating income/Average stockholder's equity = $ 342320/ $ 1,240,000 = 28% Average stockholder's equity= (Opening balance + closing balance)/2 = (1,188,000+1,292,000)/2 =1240000 Asset Turnover = Sales or Revenues / Total Assets = $ 4,202,000/2,612,000=161% Residual Income (RI) = A (B × C) In the above formula, A = Department's net operating income; B = Minimum required return on assets = 19% C = Average operating assets of the department = (2612000+2547000)/2 = $ 2,579,500 = 342320- (19% x 2579500) = -147785