CONSULTEX, INC. Balance Sheet October 31 2018 2017 Assets Cash $10,330 $13,600 13,600 Accounts Receivable Prepaid Rent Land 11,800 1,900 2,800 25,000 $50,830 $38,200 10,000 Total Assets Liabilities and Stockholders' Equity Salaries and Wages Payable Income Taxes Payable Notes Payable (long-term) Common Stock $ 1,900 $ 2,800 1,000 1,000 11,800 13,600 19,600 8,800 Retained Earnings Total Liabilities and Stockholders’ Equity 14,730 13,800 $50,830 $38,200 CONSULTEX, INC. Income Statement For the Year Ended October 31 2018 2017 Sales Revenue Salaries and Wages Expense Rent Expense Utilities Expenses Income before Income Tax Expense Income Tax Expense $157,000 $160,000 97,800 96,800 35,800 29,800 19,800 19,500 3,900 13,600 4,080 $ 2,730 $ 9,520 1,170 Net Income
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Consultex, Inc., was founded in 2015 as a small financial consulting business. The company had done reasonably well in 2015–2017 but started noticing its cash dwindle early in 2018. In January 2018, Consultex had paid $15,000 to purchase land and repaid $3,000 principal on an existing promissory note. In March, the company paid $1,800 cash for dividends and $1,000 to repurchase and eliminate Consultex stock that had previously been issued for $1,000. To improve its cash position, Consultex borrowed $4,800 by signing a new promissory note in May and also issued stock to a new private investor for $11,800 cash. Year-end comparative balance sheets and income statements are presented below.
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