Question

Correctly answer each part of question #5

Aa Aa 5. Stockholders' equity The right side of the balance sheet shows the firm's liabilities and stockholders' equity. Which of the following best describes shareholders' equity? O Equity is the sum of what the initial stockholders paid when they bought company shares and the earnings that the company has retained over the years. O Equity is the difference between the paid-in capital and retained earnings. NOW Inc. released its annual results and financial statements. Grace is reading the summary in the business pages of today's paper. In its annual report this year, NOW Inc. reported a net income of $152 million. Last year, the company reported a retained earnings balance of $578 million, whereas this year it increased to $680 million. How much was paid out in dividends this year? O $50 million O $254 million $255 million O $4 million

Answer 1

1.

Following best describes Shareholder's equity -

Equity is the sum of what the initial shareholders paid when they bought company shares and the earnings that the company has retained over years.

second option is incorrect.

The ownership of company is divide in an equal amount of share and these shares called Equity or common stock. The value Equity in a company is equal to sum of amount paid by initial stock holder to by ownership in company and amount of earning retained over the year growth of the company.

For a particular year, retained earning = Net Income - Dividend paid

2.

Following information provided

Net Income = $ 152 millions

retained earning in last year balance sheet = $ 578 millions

retained earning in current year balance sheet = $ 680 millions

Balance sheet shows the accumulated balance of retained earnings on balance sheet date.

Thus,

retained earning for current year = $ 680 - $ 578 = $ 102 millions

and,

Dividend for current year = Net Income - retained earnings for current year

Dividend for current year = $ 152 - $ 102 = $ 50 millions

Thus, Dividend paid out this year is $ 50 millions.