If investors are truly interested in knowing a company’s future cash flows, why would they care about current earnings? a.Net income provides an estimate of sustainable “annualized” long-run future free cash flows. b.Accruals and deferrals imitate the “lumpiness” inherent in…
Mr. Capstan kept coming back to three questions: Was his company really in trouble? Could the bank be right in its decision to withhold further credit? And why was the company’s indebtedness increasing when its profits were higher than ever?
Phillips Company bought 40 percent ownership in Jones Bag Company on January 1, 20X1, at underlying book value. In 20X1, 20X2, and 20X3, Jones Bag reported net income of $8,000, $12,000, and $20,000, and dividends of $15,000, $10,000, and $10,000,…
Garza Company owns 40% interest in the stock of Kenney Corporation. During the year, Kenney pays $30,000 in dividends to Garza, and reports $150,000 in net income. Garza Company’s investment in Kenney will increase by ??
Must a company focus on cash flows or accounting profits in making the capital decision? Must company be involved in incremental cash flow, incremental profit, total free cash flow, or total profit. Professional economist once told his class, “Individual decision…
Jackson Company’s credit history indicates that 60 percent of revenue is collected in the quarter the sales occur, 35 percent in the quarter following the month of sales, and 5 percent in the quarter thereafter. Assume Jackson’s cash sales remain…
Oriole Company reported pretax net income from continuing operations of $1,000,000 and taxable income of $1,200,000. The unfavorable book-tax difference of $200,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $300,000 due…
In the second assigned write-up, students will write about the dividend and share repurchase policy For Coca Cola. Students will be required to submit a written paper of 1-2 pages (1″ margin, 11 pt font, and double-spaced). The write-ups are…
Per UnitPercent of SalesSelling price$ 150100%Variable expenses6040%Contribution margin$ 9060% Fixed expenses are $355,000 per month. The company is currently selling 5,000 units per month. The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in…
Merlin Company bought 18,000 shares of the voting common stock of Arthur Corporation in January 2012. In December, Arthur announced $200,000 net income for 2012 and declared and paid a cash dividend of $2 per share on the 200,000 shares…
