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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

FINANCIAL STATEMENTS The Davidson Corporation’s balance sheet and income statement are provided here.

Davidson Corporation: Balance Sheet as of December 31, 2015

(Millions of Dollars)

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Davidson Corporation: Balance Sheet as of December 31, 2015

(Millions of Dollars)

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a. Construct the statement of stockholders’ equity for December 31, 2015. No common stock was issued during 2015.

b. How much money has been reinvested in the firm over the years?

c. At the present time, how large a check could be written without it bouncing?

d. How much money must be paid to current creditors within the next year?

a.

Summary Introduction

To prepare: The statement of stockholders’ equity for December 31, 2015.

Financial Statements: A part of annual report that is attributed to the financials of the company for an accounting period is called financial statements. These include income statement, statement of retained earnings, balance sheet and cash flow statement.

Statement of Stockholders’ Equity: Statement of stockholders’ equity reports the opening and closing balance of stockholder’s equity with the changes incurred during the accounting period.

Explanation

Statement of stockholders’ equity:

 

Shares

(000,000)

Common Stock

(million $)

Retained Earnings

(million $)

Total Stockholders’ Equity

(million $)

Balances, December 31, 20131002601,3741,634
2014 Net income  372 
Cash dividends  (146) 
Addition to retained earnings   226
Balances, December 31, 2014  1,6001,860

Table (1)

Therefore Company D has stockholders’ equity of $1,860 million at the end of year 2015...

b.

Summary Introduction

To identify: The amount reinvested in the firm over the years.

Retained Earnings: The companies retain some portion of their net income to support the business operations, expansion plans and other long term assets. That remaining portion of a company’s net incomes is called retained earnings.

c.

Summary Introduction

To identify: The maximum amount of check that could be written and cleared.

d.

Summary Introduction

To determine: The amount needs to be paid to creditors within the next year.

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