Brooks Sporting Inc. is prepared to report the following 2019 income statement (shown in thousands of dollars). Sales $12,900 Operating costs including depreciation 9,804 EBIT $3,096 Interest 264 EBT $2,832 Taxes (25%) 708 Net income $2,124 Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 330,000 shares of common stock outstanding, and its stock trades at $41 per share. The company had a 25% dividend payout ratio in 2018. If Brooks wants to maintain this payout ratio in 2019, what will be its per-share dividend in 2019? Do not round intermediate calculations. Round your answer to the nearest cent.$ If the company maintains this 25% payout ratio, what will be the current dividend yield on the company's stock? Do not round intermediate calculations. Round your answer to two decimal places. % The company reported net income of $1.95 million in 2018. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2018? Do not round intermediate calculations. Round your answer to the nearest cent.$ As an alternative to maintaining the same dividend payout ratio, Brooks is considering maintaining the same per-share dividend in 2019 that it paid in 2018. If it chooses this policy, what will be the company's dividend payout ratio in 2019? Do not round intermediate calculations. Round your answer to two decimal places. % Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain the same per-share dividend. Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain a constant dividend payout ratio.
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.
Brooks Sporting Inc. is prepared to report the following 2019 income statement (shown in thousands of dollars).
| Sales | $12,900 |
| Operating costs including |
9,804 |
| EBIT | $3,096 |
| Interest | 264 |
| EBT | $2,832 |
| Taxes (25%) | 708 |
| Net income | $2,124 |
Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 330,000 shares of common stock outstanding, and its stock trades at $41 per share.
- The company had a 25% dividend payout ratio in 2018. If Brooks wants to maintain this payout ratio in 2019, what will be its per-share dividend in 2019? Do not round intermediate calculations. Round your answer to the nearest cent.
$
- If the company maintains this 25% payout ratio, what will be the current dividend yield on the company's stock? Do not round intermediate calculations. Round your answer to two decimal places.
%
- The company reported net income of $1.95 million in 2018. Assume that the number of shares outstanding has remained constant. What was the company's per-share dividend in 2018? Do not round intermediate calculations. Round your answer to the nearest cent.
$
- As an alternative to maintaining the same dividend payout ratio, Brooks is considering maintaining the same per-share dividend in 2019 that it paid in 2018. If it chooses this policy, what will be the company's dividend payout ratio in 2019? Do not round intermediate calculations. Round your answer to two decimal places.
%
- Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend?
- Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain the same per-share dividend.
- Since the company would like to avoid transactions costs involved in issuing new equity, it would be best for the firm to maintain a constant dividend payout ratio.
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