Galaxy technology had 705,000 of retained earning on December 31, 2013. The comp

Question

Galaxy technology had 705,000 of retained earning on December 31, 2013. The company paid common dividend of $35,200 in 2013 and had retained earnings of $532,000 on December 31,2012.

HOw much did quantom technology earn in 2013?

-Earnigns available to common stock holders?

What would earnings per share be if 45,500 shares of common stock were outstanding?

Bill JAckson anticipated cash flow from operating activities of $12 million in 2011. It will need to spend $8.2 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $1.60 million and preferred stock dividens at $1.25 million.

What is the firms projected free cash flow for 2011?

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Part A:

Closing Balance of Retained Earnings = Opening Balance of Retained Earnings + Amount Earned in 2013 - Dividends

705000 = 532000 + Amount Earned in 2013 - 35200

Amount Earned in 2013 = 705000 + 35200 - 532000 = 208200

-------------------------------------

Earnings Available to Common Stockholders = Net Income/Amount Earned in 2013 = 208200 (since dividends are paid on common stock only)

------------------------------------

Earning Per Share = Earnings Available to Common Stockholders/Number of Common Shares Outstanding = 208200/45500 = $4.575 or $4.58

Part B:

Free Cash Flow = Cash Flow from Operating Activity - Capital Expenditure = 12 - 8.2 = 3.8 million

Thanks.

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