This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Equity increased by: Equity increase = $12,190 – 10,600 Equity increase = $1,590 Net income is $7,245 but equity only increased by $1,590; therefore, a dividend of: Dividend = $7,245 – 1,590 Dividend = $5,655 must have been paid. Dividends paid is the plug variable. 2. Here we are given the dividend amount, so dividends paid is not a plug variable. If the company pays out one-half of its net income as dividends, the pro forma income statement and balance sheet will look like this: Pro forma income statement Pro forma balance sheet Sales $26,450.00 Assets $18,170.00 Debt $ 5,980.00 Costs 19,205.00 Equity 14,222.50 Net income $ 7,245.00 Total $18,170.00 Total $19,422.50 Dividends $3,622.50 Add. to RE $3,622.50 Note that the balance sheet does not balance. This is due to EFN. The EFN for this company is: EFN = Total assets – Total liabilities and equity EFN = $18,170 – 19,422.50 EFN = –$1,252.50 3. An increase of sales to $7,424 is an increase of:...
View Full Document
This note was uploaded on 07/15/2010 for the course FINANCE 318 taught by Professor Spurlin during the Spring '08 term at LA Tech.
- Spring '08