Question

The Daily News had net income of $121,600, of which, 40% was distributed to the shareholders as dividends. During the year, the company sold $75,000 worth of common stock. According to the cash flow from assets (CFFA), what is the cash flow to stockholders?

A. -$75,000
B. -$26,360
C. -$2,040
D. $123,640
E. $147,960

Answer 1

B. -$26,360

Step-by-step explanation:

Cash flow to stockholder's are net of cash inflow from stockholder's and outflow to the stockholder's.

Cash flow to Stockholder's

Cash inflows

Cash from sale of common stock = $75,000

Less: Cash outflows

Dividend paid ( 121,600 x 40%) = $48,640

Net Cash flow = $26,360

So the net cash flow to stockholder's is $26,360.