| Cash Flows from Operating Activities | ||
| *Net Income | 178 | |
| Adjustments: | ||
| Depreciation | 200 | |
| Decrease in accounts receivable | 25 | |
| Increase in inventories | (75) | |
| Decrease in account payable | (50) | |
| Net Cash provided by operating activites | 100 | |
| 278 | ||
| Cash Flows from Investing Acitvities | ||
| Increase in plant and equipment | (400) | |
| (122) | ||
| Cash Flows from Financing Acitvities | ||
| Increase in notes payable | 150 | |
| Dividens | (78) | |
| Net cash provided by financing activities | 72 | |
| Net Decrease in cash | (50) | |
| Cash, January1, 2010 | 200 | |
| Cash, December 31, 2010 | 150 |
How to find the dividens???
1. you have to understand what is retained earnings and net income after taxes
Retained earning
-The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders' equity on the balance sheet.
The formula of RE= beginning RE+ Net income – dividends
Net income
- it shows what the company earned after all its expenses, charge-offs, depreciation and taxes have been subtracted
remember net income is the company earnings that it’s not distributed to the shareholders yet (dividens).
Therefore to find the dividends in this Q, firstly you have to find the beginning RE AND current year Retained earnings and net income for the current year
Based on the financial statement in the Q
B.RE 2009- 700
E.RE 2010 – 800
Net income 2010-178
Therefore, the data can be derived in the retained earning formula to find dividends
The formula of RE= beginning RE+ Net income – dividends
RE for current year 800- B.RE 700+net income 178- dividends (X)
800= 700 + 178 – X
X=78
Thus, dividends is 78
SIMPLE RIGHT
P/S: This A has been discussed and analyzed by finance students sem 3
For more details information you can see your finance lecture
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