Corporate Finance
Case Study:
Prudential Financial Inc.: Stockholders’ Equity and Balance Sheet Leverage
1. Compare the stockholders’ equity section of the balance sheet with the statement of stockholders’ equity. Describe in general terms how they relate.
The Balance Sheet equity is a snapshot of the balances at book value of the funds contributed by the owners to finance operations, whereas the statement of stockholders’ equity shows a summary of the transactions which took place during a financial period, ie shows the movement. The closing balances in the statement of stockholders’ equity will be the balance on the Balance Sheet of the business.
For example, the common stock held in treasury in the Balance Sheet will show
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Nb in the above calculation it was assumed that the stock based compensation (ie the shares issued to employees / management) were reissued based on the same price as the shares repurchased in the market for the financial year, that is, they were not issued using FIFO or average cost, they were recorded as LIFO, last in first out.
The above assumption also applies to the senior notes that were converted to stock during the year. Senior notes are debt securities which have been exchanged into common stock.
5. What does the account “Accumulated other comprehensive income” likely represent for Prudential? What is the logic of including this account in the stockholders’ equity section of the balance sheet?
The account would represent the unrealised gains /losses estimate. This is not included in the P&L / income statement as this
Short Term Investments – totaled $220,000.00 in year 6, a gain of $21,500.00 or +10.8%.
* a. Determining the allocation of amounts paid to the repurchased shares and other elements of the repurchase transaction
Again, this is a balance sheet account. See below for more information concerning this account.
SUMMARY OF STUDY OBJECTIVES 1Identify the sections of a classified balance sheet. In a classified balance sheet, companies classify assets as current assets; long-term investments; property, plant, and equipment; and intangibles. They classify liabilities as either current or long-term. A stockholders' equity section shows common stock and retained earnings. 2Identify and compute ratios for analyzing a company's profitability. Profitability ratios, such as earnings per share (EPS), measure aspects of the operating success of a company for a given period of time. 3Explain the relationship between a retained earnings statement
1. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of uncollectible accounts expense reported on the income statement?
The net income on the income statement is used on the equity section for the balance sheet. When the net income increases of decreases because of revenue or expenses this carries over to the balance sheet under the equity section and reflects those fluctuations. This helps to give a better
By using the consolidated income statements, balance sheet and cash flow statement, we can assess the company’s financial position. On the income statement, the company’s operation revenue increased by 4.5% ($393.4 million) from year 2006 while its operating income decreased by $65.1 million in the same period. Without considering the net-cash settlement feature expense recorded in 2007, operating income increased $103.6 million. Even though including the net-cash settlement feature
(ii) An account for each unit setting forth any shares of common expenses or other charges due, the due dates thereof, the present balance due, and any interest in common surplus.”
Retained Earnings Statement shows amounts and causes of changes in retained earnings during the period. Time period is the same as that covered by the income statement. Users can evaluate dividend payment practices. This statement shows the changes in the shareholders’ equity account. The first line item is the beginning balance for common stock. The amount of newly issued common stock is added to the
We have audited the accompanying statements of financial position of X Entity as of December 31, 20X1 and 20X0, and the related statements of comprehensive income, changes in equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Equity is the internal claim of shareholders over the assets of organization. Equity portion of Statement of Financial Position contains mostly but not limited to Common Stock and Retained Earnings.
Note 3 touches on the category of cash and cash equivalents. Some of the cash equivalents are "available for sale securities." These include agency obligations ($20 million), commercial paper ($87 million), corporate debt securities ($78 million), government treasury securities ($606 million) and certificates of deposit ($64 million). In addition, the balance sheet shows $1.1886 billion in cash. There are stated at fair market value, which if it cannot be determined on the open market is estimated. The company values auction rate securities using an internally-developed valuation model. The company also notes that some of the "available for sale" securities are longer-term in
To account for inventory, the company uses, first in first out policy. Property plant and equipment are recorded at cost less the accumulated depreciation amount. Depreciation is charged on straight line method
Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation
an analysis of the company’s accounting policies that are likely to affect interpretation of its financial reports (at least 3 policies)