Khobar Company started its business in February 2001 producing and selling mix of pharmaceutical products. At the end of 2019, the company reported SAR 730,000 as sales revenues. The company's gross profit from operating activities was 20% of sales revenues. Moreover, the company's selling and administrative expenses were SAR 101,000 and company's depreciation expenses were SAR 135,000. Khobar Company is relying on debt to manage different activities, so the company reported SAR 75,000 as interest expenses. The tax rate for 2019 was 35%. The Chief Executive Officer of the company is very concerned about the profitability and liquidity of the company, so he asked you as the Financial Manager of the company: 1. To assess the net income and operating cash flow for 2019 and explain the findings to help the CEO in better understanding the difference between company's income and operating cash flow. 2. The Chief Executive Officer is planning to pay out JOD 25,000 as dividends in 2019. So, he asked you to advise him if the company can pay out SAR 25,000 as cash dividends in 2019 and why?
Khobar Company started its business in February 2001 producing and selling
mix of pharmaceutical products. At the end of 2019, the company reported SAR
730,000 as sales revenues. The company's gross profit from operating activities
was 20% of sales revenues. Moreover, the company's selling and administrative
expenses were SAR 101,000 and company's
135,000.
Khobar Company is relying on debt to manage different activities, so the
company reported SAR 75,000 as interest expenses. The tax rate for 2019 was
35%.
The Chief Executive Officer of the company is very concerned about the
profitability and liquidity of the company, so he asked you as the
Manager
1. To assess the net income and operating
explain the findings to help the CEO in better understanding the
difference between company's income and operating cash flow.
2. The Chief Executive Officer is planning to pay out JOD 25,000 as
dividends in 2019. So, he asked you to advise him if the company
can pay out SAR 25,000 as cash dividends in 2019 and why?
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