Question

of a company during a a firm's gross income, expenses, net income, and the income that is available for distnibution to its preferred and common principles (GAAP) that match the firm's revenues and expenses to the period in and analysts use the information given in the income statement and other financial statements and reports to evaluate the company's financial performance and condition and taxes (EBIT). 3. The company's tax rate remains constant at 40% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Green Caterpillar expects to pay $300,000 and $1,583,550 of preferred and common stock dividends, respectively. O Type here to search

Answer 1

The completed income statement is as shown:

• In year 2, if Green caterpillar has 25,000 shares of preferred stock issued, then each shareholder should expect to receive $12 in annual dividends. (300,000 is the total preferred stock dividend divided by 25,000)
• If Green caterpillar has 200,000 shares of common stock issued, then the firm's EPS is expected to change from 13.08 in Year 1 to 16.10 in Year 2. (EPS calculated as earnings available for common shareholders divided by common shares outstanding)
• Green caterpillar's EBITDA value changed from 6,000,000 in Year 1 to 7,500,000 in Year 2. (EBITDA is simply net sales minus operating costs excluding depreciation and amortization).
• It is wrong to say.........This is because not all items reported in the income statement.....(This is because depreciation and amortization are non cash expenses. To calculate the company's net cash flows, these items need to be added back to the firm's net retained earnings)