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2 years ago

Which are 3 common misconceptions users of an income statement may have?

1 answer:

3 0

The three most frequent misconceptions are that net income equals cash, net income excludes estimates, and net income reports all changes in value that occurred during the accounting period.

One of the three crucial financial statements used to describe a company's financial performance throughout a certain accounting period is the income statement. The balance sheet and the cash flow statement are the other two important statements. The income statement, which is often referred to as the profit and loss (P&L) statement or the statement of revenue and expense, primarily focuses on the company's revenue and expenses over a specific time period. Understanding how to study an income statement is the greatest approach to evaluate a business and choose whether or not to invest.

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Venzuela Company’s net income for 2020 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issue

aev [14]

Answer:

$4.67 per share

Explanation:

The calculation of the diluted earning per share is given below:

= (Total income - preference dividends) ÷ (outstanding shares + diluted shares)

where,

Total income is $50,000

Outstanding shares is 10,000

And, the diluted shares is computed by following calculations

Amount paid towards shares = Options issued × Exercise price per share

= 1,000 × $6

= $6,000

And,

Value of options = Amount paid towards shares ÷ Current market price

= $6,000 ÷ $20

= 300

Therefore,

Diluted shares is

= Options issued - value of options

= 1,000 - 300

= 700

So Diluted Earnings per share is

= ($50,000) ÷ (10,000 + 700)

= $4.67 per share

4 0

3 years ago

Grand Energy Corporation (GE) plans to issue bonds to raise $190 million. GE's investment banker will charge 5 percent of the to

Pavlova-9 [17]

The number of bonds that GE must sell to net $190 million after flotation costs is 200,000 bonds.

<h3>Number of bonds</h3>

First step is to calculate the amount issue

Net proceeds = Amount of issue x (1 - Flotation costs)

$190,000,000 = Amount of issue x (1 - 0.05)

Amount of issue = $190,000,000/0.95

Amount of issue= $200,000,000

Second step is to calculate number of bonds

Number of bonds = $200,000,000/$1,000

Number of bonds= 200,000 bonds

Inconclusion the number of bonds that GE must sell to net $190 million after flotation costs is 200,000 bonds.

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7 0

2 years ago

Bethesda Biosys issues an IPO on a best-efforts basis. The company's investment bank requires a spread of 18 percent of the sell

Andrej [43]

Answer:

Bethesda Biosys

Issue of an IPO:

Net proceeds for the issuer is $82 million, if all the 4 million shares are bought by investors.

Explanation:

a) Calculations:

The spread is $4.5 (18% of $25) per share, since average selling price is $25.

Therefore, the net proceed per share is $20.50 ($25 - 4.50).

And the Total Net Proceeds = $82 million ($20.50 * 4 million), assuming that all four million shares were bought by the public.

Note that the question did not provide the necessary information to make the final decision.

b) During the issue of securities, especially an IPO, underwriters, such as investment banks, pay an issuing company for the securities and then sell the securities to the public. There is always a difference per share price that they are willing to pay the issuer and what they will collect from the investing public. That difference is called the underwriting spread or simply the spread.

c) Best-Efforts Basis: According to investopedia.com, underwriting on best-effort basis is "an agreement between an underwriter and an issuer in which the underwriter agrees to place as much of an offering with investors as possible, but is not responsible for any portion of the offering it fails to sell."

4 0

3 years ago

On February 1, a seller paid $1,140 in annual property tax for the current calendar year. He sold the house with the closing set

Vera_Pavlovna [14]

<u>Given:</u>

Annual property tax = $1,140

Number of days = 91

Seller's credit for property tax

<u>Solution:</u>

The following is the calculation of the seller credit for property taxes,

$\text{Seller credit for property taxes} = \text{Total tax}\times \frac{\text{Number of days}}{360}$

On plugging-in the values we get,

$\text{Seller credit for property taxes} = \$1,140\times\frac{91}{360}$

$\Rightarrow \$1,140\times0.25278 = \$288$

Therefore, the seller's credit for property taxes is $288.

6 0

3 years ago

Zach has decided to start his own photography studio. To purchase the necessary equipment, Zach withdrew $10,000 from his saving

Serga [27]

Answer:

Zach's annual opportunity cost of the financial capital(implicit + explicit)that has been invested in the business is $700.

Explanation:

opportunity cost = 3%($10,000) +8%($5,000)

= $300 + $400

= $700

Therefore, Zach's annual opportunity cost of the financial capital(implicit + explicit)that has been invested in the business is $700.

3 0

3 years ago