The company paid dividends of $132,000 last year. The \"Investment in Balsam Com
ID: 2589266 • Letter: T
Question
The company paid dividends of $132,000 last year. The "Investment in Balsam Company" on the statement of financial position represents an investment in the stock of another company.
Compute the company's margin, turnover, and return on investment for last year. (Round your intermediate calculations and final answers to 2 decimal places.)
The Board of Directors of Redstone has set a minimum required return of 38%. What was the company's residual income last year? (Round your intermediate calculations and final answers to 2 decimal places.)
Financial data for Redstone Company for last year appear below:
Explanation / Answer
Beginning operating assets=1766000-238000-278000= 1250000 Ending operating assets=1805575-326000-278000= 1201575 Average operating assets = (1250000+1201575)/2= 1225787.50 1 Margin = Net operating incom/Sales=493500/2350000= 21.00% Turnover = Sales/Average operating assets=2350000/1225787.5= 1.92 ROI = Margin*Turnover =21%*1.92= 40.32% 2 Residual income=493500-(1225787.5*38%)= 27700.75