The company paid dividends of $158,200 last year. The “Investment in Buisson, S.
ID: 2472531 • Letter: T
Question
The company paid dividends of $158,200 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.)
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?
Financial data for Joel de Paris, Inc., for last year follow:
Explanation / Answer
Margin = Net operating income / sales
=577,200 / 4,440,000
=13%
Turnover = sales / average operating assets
( for calculating average operating assets the investment and underdeveloped land will be excluded)
= 577,200/1,850,000
=2.4
ROI = 13 *2.4
= 31.2%
2) Residual income
= Net income – ( averages operating assets * minimum required rate of return)
= 577,200 - ( 1,850,000 @19%)
= 225,700
Margin = Net operating income / sales
=577,200 / 4,440,000
=13%
Turnover = sales / average operating assets
( for calculating average operating assets the investment and underdeveloped land will be excluded)
= 577,200/1,850,000
=2.4
ROI = 13 *2.4
= 31.2%
2) Residual income
= Net income – ( averages operating assets * minimum required rate of return)
= 577,200 - ( 1,850,000 @19%)
= 225,700