1.
Operating assets refer to those assets which are acquired by the company to support its ongoing business operations. These are the assets that contribute to generating revenue. For instance, cash,
:
The average operating assets of the company.
2.
:
The margin, turnover, and return on investment (ROI) for the last year of the company.
3.
Residual income: A business performance measurement that takes into account the minimum required return on the asset employed is a residual income, which the company expects from the asset in which the investment has been made. In the other words, residual income is the number of excess earnings earned over and above the minimum required return of the capital invested.
:
The residual income of last year.
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MANAGERIAL ACCT(LL)+CONNECT+PROCTORIO PL
- A7arrow_forwardROI?arrow_forwardA company reports the following for the past year. Sales $ 11,680,000 Income 5,256,000 Average assets 29,200,000 The company's CFO believes that income for next year will be $6,832,800. Average assets will be the same as the past year. 1. Compute return on investment for the past year. 2. If the CFO's forecast is correct, what will return on investment be for next year?arrow_forward
- Problem 11-17 (Algo) Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Incorporated, for last year follow: Joel de Paris, IncorporatedBalance Sheet Beginning Balance Ending Balance Assets Cash $ 139,000 $ 133,000 Accounts receivable 340,000 489,000 Inventory 560,000 487,000 Plant and equipment, net 821,000 791,000 Investment in Buisson, S.A. 395,000 434,000 Land (undeveloped) 254,000 249,000 Total assets $ 2,509,000 $ 2,583,000 Liabilities and Stockholders' Equity Accounts payable $ 378,000 $ 333,000 Long-term debt 1,041,000 1,041,000 Stockholders' equity 1,090,000 1,209,000 Total liabilities and stockholders' equity $ 2,509,000 $ 2,583,000 Joel de Paris, IncorporatedIncome Statement Sales $ 5,264,000 Operating expenses 4,369,120 Net operating income 894,880 Interest and taxes: Interest expense $ 118,000 Tax expense 207,000 325,000 Net income $ 569,880 The…arrow_forwardRequired information [The following information applies to the questions displayed below.] The following information relates to a company's operations for last year. $ 1,300,000 Sales Variable expenses Contribution margin 440,000 860,000 600,000 Fixed expenses Net operating income 260,000 Average operating assets 812,500 The company's minimum required rate of return is 15%. 1. Calculate last year's return on investment (ROI). ROIarrow_forwardReturn on Investment (ROI) Analysis The contribution formal income statement for Huerra Company for last year is given below: The company had average operating assets of $2,000,000 during the year. Required: 1. Compute the company’s return on investment (ROI) for the period using the ROI formula stated in terms of margin and turnover. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (l) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $400,000. (The released funds are used to pay off short-term creditors.) 3. The company achieves a cost savings of $32,000 per year by using less costly materials. 4. The company issues bonds and uses the proceeds to purchase machinery and equipment that…arrow_forward
- Data table Operating income $ 9,100 Total assets $ 14,000 Current liabilities $ 4,400 Sales $ 35,000 Target rate of return 15% Print Done - Results from Prime Corporation's most recent year of operations are presented in the following table. (Click the icon to view the information.) Requirements 1. Calculate the sales margin, capital turnover, and return on investment (ROI). 2. Calculate the residual income (RI). Requirement 1. Calculate the sales margin, capital turnover, and return on investment (ROI). First enter the formula, then calculate the sales margin. + = Sales marginarrow_forwardOperating data from Tindall Company for last year follows: Sales.... $900,000 $500,000 Stockholders' equity Return on investment. 12% Average operating assets 2 Turnover. Residual income. Minimum required rate of return.... Total assets The average operating assets amounted to: Select one: a. $600,000 b. $400,000 c. $500,000 d. $800,000 1.5 ? 10% $800,000arrow_forwardPlease do not give solution in image format thankuarrow_forward
- Answer the part 4 onlyarrow_forwardProblem 11-17 (Algo) Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc.Balance Sheet BeginningBalance EndingBalance Assets Cash $ 138,000 $ 134,000 Accounts receivable 342,000 483,000 Inventory 580,000 473,000 Plant and equipment, net 810,000 820,000 Investment in Buisson, S.A. 400,000 435,000 Land (undeveloped) 248,000 250,000 Total assets $ 2,518,000 $ 2,595,000 Liabilities and Stockholders' Equity Accounts payable $ 375,000 $ 340,000 Long-term debt 1,046,000 1,046,000 Stockholders' equity 1,097,000 1,209,000 Total liabilities and stockholders' equity $ 2,518,000 $ 2,595,000 Joel de Paris, Inc.Income Statement Sales $ 5,103,000 Operating expenses 4,235,490 Net operating income 867,510 Interest and taxes:…arrow_forwardsubject-Acountingarrow_forward
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