The rationale for the nondisclosure in comprehensive income is the susceptible

# The rationale for the nondisclosure in comprehensive

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The rationale for the nondisclosure in comprehensive income is the susceptible elements from unrealized income or losses. 2. Shareholder’s equity represents capital directly invested in the company by owners plus retained earnings. Generally, we use return on equity (ROE) This ratio is used to calculate company profit as a percentage of total equity. In this case, we are able to know net income is \$12,505,417.87 from the year ended income statement, and book value of equity is \$11,668,540.46 from the year ended balance sheet, then by calculating ROA=12,505,417.87/11,668,540.46=1.07. This means the company earned a 107% profit on every dollar invested by shareholders. This ROE result is not bad for a Peyton. Also, by calculating earnings per share (EPS) = (12,505,417.87-50,000)/1,750,000=\$7.12. The higher the EPS is, the more money company shares of stock will be worth because investors are willing to pay more for higher profits. Therefore, based on the result \$7.12 of EPS, Peyton would whether have potentially worthwhile investment, depending on the market price of the stock. Peyton Approved company decided to expand the business and
4 require additional capital, and the following analyses will demonstrate the impact on company goals and finances according to the financial information attached on the stockholder equity section. The option 1, Peyton issuing an additional \$1,000,000 of 10%, 100-par convertible preferred stock. In this scenario, if Peyton convert the shares to equity share during the year, then Eps would go up or go down depending on existing equity shares and the how many numbers of shares converted. If preferred stock not convert during the year, then after tax profit, the preference dividend will be \$500,000 (600,000-1,000,000*10%), and it would make EPS go up in the year. The option 2, Peyton issue an additional \$1,000,000 of 8% convertible bonds. After tax profit, the result will be \$520,000 (600,000-100,000*8%). EPS might be various which depend on the numbers of bond would be converted. The option 3, if \$500,000 each of preferred stock and bonds, the result of after tax profit would distribute to equity is \$510,000 (600,000- 500,000*8%-500,000*10%). Then EPS might be various which depend on whether the conversion take place or not. In conclusion, the ideal outcome of Peyton issues bonds instead of converting bonds, that means equity shareholders would have higher after tax profit in the year. 3. Retained earnings per shares is the net income less dividend on preferred stock divided by shares outstanding. By calculating earnings per share (EPS) = (12,396,457.01 -50,000)/1,750,000=\$7.06. The higher the EPS is, the more money company shares of stock will be worth because investors are willing to pay more for higher profits. Peyton still is a worthwhile investment. However, Peyton would whether potentially worthwhile investment, depending on the market price of the stock. 4. The rules are different based on whether the preferred shares are participating and/or cumulative. Issuing preferred stock would be equity to a company. When company
5 issues the preferred stock, the organization would pay fixed dividend prior to common stock holders. The retained earnings would be decreased on the equity structures because the dividend had been paid. When the preferred stock is convertible preferred stock, the

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