Question

As you approach? graduation, you are evaluating your job offers from the following companies. Assuming that...

As you approach? graduation, you are evaluating your job offers from the following companies. Assuming that all other factors are equal? (pay, benefits,? location, job? duties, industry, company? size, company age? etc.), for which of the following companies would you chose to work and? why?

A

B

C

Cash Flows from operations

?+$115,000

?$100,000

?$0

Cash Flows from investing activities

?($20,000)

?$0

Cash Flows from financing activities

?+$5,000

?+$100,000

Net increase in cash for the most current year

?+$100,000

?+$100,000

?+$100,000

A.

Company? B, the company only generates cash from its daily operations and is not spending the cash for any other reason.

B.

All three companies offer the same opportunity for the future.

C.

Company? C, the company only generates cash from the owners.

D.

Company? A, the company is generating cash from its daily? operations, investing in

long?term assets and generating cash from? its' owners or borrowing a relatively small amount.

Before a 22?form?1 stock? split, the shares outstanding were 40,000 shares at $70 par. After the? split, what was the par value and number of? shares?

A.

80,000

shares and $70?/share

B80,000

shares and $35?/share

C.

20,000

shares and $35?/share

D.

20,000

shares and $70?/share

Business   Accounting   
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Homework Answers

Answer #1
  • All working (if any required) forms part of the answer
  • Answer 1:

The correct option would be Option ‘D’: Company A, as the company is generating cash from its daily operations, investing in long term assets and generating cash from its owners or borrowing a relatively small amount.

‘B’ company is not recommended as it is only generating cash from operations.
‘C’ is not recommended as it is generating nothing from its operations.

  • Answer 2:

Shares outstanding before Split:
40,000 shares at $ 2,800,000 [ 40000 x 70]

Stock split = 2 for 1
40,000 shares will be come 80,000

Hence, after stock split:
80,000 at $ 2,800,000

Hence, the new par value will be $ 2,800,000 / 80,000 shares = $ 35 per share.

Therefore the correct answer is Option ‘B’: 80,000 shares and $ 35/ share

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