Retained earnings

of a company is determined solely by the earning power of its assets and investments. Focuses more on firm value but not on firm risk. MM argued that if a company with investment opportunities decides to pay dividend, so that retained earnings are insufficient to finance all its investments, the shortfall in funds will be made up by obtaining additional funds from outside sources. As a result of obtaining outside finance instead of using retained earnings: Loss of value in existing shares =…

Stockholders’ equity will increase D. Liabilities will decrease 3) Using accrual accounting, expenses are recorded and reported only: When they are incurred whether or not cash is paid When they are incurred and paid at the same time If they are paid before they are incurred If they are paid after they are incurred 4) Stockholders’ equity can be described as claims of Creditors on total assets Owners on total assets Customers on total assets Debtors on total assets 5) The…

from Continuing Operations Total Other Income/Expenses Net 589,800 577,200 559,800 Earnings Before Interest And Taxes 6,555,700 7,372,000 8,204,500 Interest Expense - - - Income Before Tax 6,555,700 7,372,000 8,204,500 Income Tax Expense 2,026,400 2,614,200 2,618,600 Minority Interest - - - Net Income 4,529,300 4,757,800 5,585,900 Beginning Retained Earnings Balance 43, 294, 500 41,751,200 39,278,000 Cash Dividends -3,229,300 -3,216,100…

price or market value. The paid-in-capital account represents the amount over and above the par value that was paid by shareholders purchasing stock when it was originally sold. The third account is called the retained earnings account and it shows the accumulated undistributed earning within the corporation over time. The statement of cash flows provides a summary of the cash inflows and outflows during a specific period. The three sections includes a. Operating cash flows: It shows cash…

Among the main factors proposed as rationale for mergers, from the society’s point of view the most justifiable factor is synergy. Synergy refers to the economic benefit which could be achieved through the merger of companies and is often considered as the major driving force for a merger. With synergy the post merger share price of the company increases and shareholders will benefit. The synergy from the merger could be attributed to a handful of factors, such as increase in revenue,…

Mini Case (p. 45) A. Why is corporate finance important to all managers? Managers of a company must know the finance of a company as this help managers to know the health of the company and can act accordingly with a common guideline .Suppose a marketing manager going to market to sell the company’s products .and he does not know the company is running financial trouble and products are not matching proper quality standards and unfortunately the products are sold to the customers .The…

Intel’s Profit Margin is also higher than the industry average which was 14.20%. The positive earnings of Intel and the negative earnings for AMD has resulted in better ratios for Intel when it comes to Return on Equity, Return on Assets and P/E ratio. Although Intel’s P/E ratio of 14.25 is in the positive it also showcases that they are expected to grow less than…

Balance Sheet: Assets Equities Current Assets: $87,000 Current Liabilities: $19,000 Noncurrent Assets: $186,000 Bonds Payable: $100,000 Preferred Stock: $20,000 Common Stock: $50,000 Pic in Excess of Par: $48,000 Retained Earnings: $36,000 __________________________ __________________________ Total Assets: $273,000 Total Equities: $273,000 “Under the proprietary theory, financial reporting is based on the premise that the owner is the primary focus of a…

1) Cartwright Lumber has had steady YOY growth of 19% and 34% in 2002 and 2003 respectively. However, the first quarter of 2004 demonstrates slow growth to only 7%. This slowdown in growth is cause for question as to the projected continued growth of the business. Further analysis into the financial statements will reveal additional risk. Cartwright has had a steady decrease in cash, and an increase in AR and inventory which means more sales to customers but these sales are on credit. Cartwright…

Basic journal entries The following transactions pertain to the Jennifer Royall Company: May 1 Jenni¬fer Royall invested cash of $25,000 and land valued at $15,000 into the business. Cash…. $25.000 and Land $15,000= Owner’s equality $ 40,000 5 Provided $1,000 of services to Jason Ratchford, a client, on account. Account receivable $1,000 Revenue $1,000 9 Paid $1,250 of salaries to an employee. Salary Expensive $1,250 Cash $1,250 14 Acquired a new computer for…