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3 years ago

If Newble paid dividends of $100 million in 2016 and made no stock issues, what must have been net income during the year?

Business

1 answer:

Arisa [49]3 years ago

8 0

Answer: $310 million

Explanation:

The net income is used to pay dividends as well as being added to equity at the end of the period. If no new stock was issued then the net income would be the increase in equity plus dividends.

Increase in Equity = Equity 2016 - Equity 2015

Equity 2016 = Total assets 2016 - total liabilities 2016

= ( 420 + 1,420) - ( 240 + 920)

= $680 million

Equity 2015 = Total assets 2015 - total liabilities 2015

= ( 310 + 1,200) - ( 210 + 830)

= $470 million

Increase in Equity = 680 - 470

= $210 million

Net Income = Increase in equity + dividends

= 210 + 100

= $310 million

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