Question

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 $156 million. Last year, the company reported a retained earnings balance of $527 million, whereas this year it increased to $620 million. How much was paid out in dividends this year

Answer 1

Answer:

$63 million was paid as dividends this year.

Explanation:

In the balance sheet,  retained earnings increased from $527 million reported last year to $620 million reported this year. This increase implies that for this year the company retained profits of:

$620m- 527m = 93m$

If the company reported a net income of $156 million and only $93 million was retained, then the difference between the two figures is what was paid as dividends this year i.e:

Net income            $156,000,000

Less dividends           xxxxxx      

Retained earnings  $ 93,000,000

the figure for dividends is thus $63 million.