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  3. problem # 2 financial data for bravo company for l

Problem # 2 Financial data for Bravo Company for last year appear below: Bravo...

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Accounting

Problem # 2

Financial data for Bravo Company for last year appear below:

Bravo Company
Statement of Financial Position
Beginning Balance Ending Balance
Assets
Cash 500,000 700,000
Accounts Receivable 200,000 250,000
Inventory 300,000 350,000
Plant and equipment (net) 1,200,000 1,100,000
Investment in Charlie Company 800,000 1,000,000
Land (undeveloped) 1,700,000 1,700,000
Total Assets 4,700,000 5,100,000
Liabilities and owners' equity
Accounts Payable 700,000 900,000
Long-term Debt 2,500,000 2,500,000
Owners' equity 1,500,000 1,700,000
Total Liabilities and Owners' Equity 4,700,000 5,100,000
Bravo Company
Income Statement
Sales 4,140,000
Less: Operating Expenses 3,519,000
Net Operating Income 621,000
Less: Interest Expense 300,000
Tax Expense 100,000 400,000
Net Income 221,000

The company paid dividends of 21,100 last year. The "Investment in Charlie Company" on the statement of financial position represents an investment in the stock of another company.

Required:

  1. Compute the company's margin, turnover, and return on investment for last year.
  2. The Board of Directors of Bravo Company have set a minimum required return of 20%. What was the company's residual income last year?

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