Question

A company paid out $100 million in common dividends during the year. It ended the year with $400 million in retained earnings versus the prior year's retained earnings of $ $250 million. . How much net income did the firm earn during the year?

a.$150 million
b.$50 million
c.$500 million
d.$250 million

Answer 1

To calculate the net income of the firm, we can use the formula: Net Income = Retained Earnings at the end of the year - Retained Earnings at the start of the year + Dividends Paid. By plugging in the given values, we find that the firm earned a net income of $250 million during the year.

To calculate the net income of a firm, we need to consider the changes in retained earnings and dividends paid. The formula to calculate net income is:

Net Income = Retained Earnings at the end of the year - Retained Earnings at the start of the year + Dividends Paid

In this case, the retained earnings at the start of the year were $250 million, and the retained earnings at the end of the year were $400 million. The dividends paid were $100 million. Plugging these values into the formula, we get:

Net Income = $400 million - $250 million + $100 million = $250 million

Therefore, the firm earned a net income of $250 million during the year.