Chapter 11 6 Saved Help Save & Exit Submit Check my work 6 Joel de Paris, Ine In

Question

Chapter 11 6 Saved Help Save & Exit Submit Check my work 6 Joel de Paris, Ine Income Statement Sales Operating expenses Net operating income Interest and taxes: 4,836,000 4,062,240 773,760 10 points s 113,000 Interest expense Tax expense 210,000323000 $ 450,760 Net income eBook Print The company paid dividends of $327,760 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. References Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROl) for last year. Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company's residual income last year? 1. Average operating assets 2. Margin Tunover ROl 3. Residual income Mc Hill

Explanation / Answer

1) Margin = net operating income/sales Turnover = sales/average operating assets ROI          = margin * turnover Margin 16.0% (773760/4836000) turnover 2.60 (4,836,000/1,860,000 ROI 41.6% total operating assets don't include investments in other companies or in undeveloped land ending Beginning balances balances Cash 127,000 134,000 account receivable 475,000 339,000 inventory 490,000 575,000 plant and equipment,net 788,000 792,000 total Assets 1,880,000 1,840,000 Average operating assets = ( ending balances + beginning balances )/2 (1880000+1840000)/2 1860000 2) Net operating income 773,760 minimum required return 34% (just an assumed figure take as given in ur question) residual income 141360 Residual income =net operating income - (average operating assets *min required return)

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