The table below contains data on Fincorp Inc. The balance sheet items correspond to values at year-end 2018 and 2019, while the income statement items correspond to revenues or expenses during the year ending in either 2018 or 2019. All values are in thousands of dollars. 2018 2019 Revenue $ 4,800 $ 4,900 Cost of goods sold 1,800 1,900 Depreciation 530 550 Inventories 250 310 Administrative expenses 440 490 Interest expense 160 160 Federal and state taxes* 560 580 Accounts payable 300 360 Accounts receivable 420 490 Net fixed assets† 5,800 6,500 Long-term debt 2,800 3,150 Notes payable 700 510 Dividends paid 370 370 Cash and marketable securities 810 490 * Taxes are paid in their entirety in the year that the tax obligation is incurred. † Net fixed assets are fixed assets net of accumulated depreciation since the asset was installed. Suppose that Fincorp has 575,000 shares outstanding. What were earnings per share?
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The table below contains data on Fincorp Inc. The
| 2018 | 2019 | |||||
| Revenue | $ |
4,800 |
$ | 4,900 | ||
| Cost of goods sold |
1,800 |
1,900 | ||||
| 530 | 550 | |||||
| Inventories | 250 | 310 | ||||
| Administrative expenses | 440 | 490 | ||||
| Interest expense | 160 | 160 | ||||
| Federal and state taxes* | 560 | 580 | ||||
| Accounts payable | 300 | 360 | ||||
| 420 | 490 | |||||
| Net fixed assets† | 5,800 | 6,500 | ||||
| Long-term debt | 2,800 | 3,150 | ||||
| Notes payable | 700 | 510 | ||||
| Dividends paid | 370 | 370 | ||||
| Cash and marketable securities | 810 | 490 | ||||
* Taxes are paid in their entirety in the year that the tax obligation is incurred.
† Net fixed assets are fixed assets net of
Suppose that Fincorp has 575,000 shares outstanding. What were earnings per share?
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