Question

Company X had $300 in interest expense in 2018, and paid out $150 in dividends to shareholders that year. It's 2017 balance sheet showed long-term debt in the amount of $2250 and common stock (with additional paid in capital included) of $4475. The 2018 balance sheet of the company showed long-term debt and common stock of $1975 and $5460, respectively. What was Company X's Cash Flow to Stockholders in 2018?

a. +$835

b. +$985

c. -$685

d. +$975

e. -$835

Answer 1

e. -$835.

Step-by-step explanation:

Cash Flow to Stockholders is the difference between dividend paid and net new common equity raised. The Company X has paid $150 as dividend. The additional capital raised is included in common stock amount. The difference between common stock account of 2017 and 2018 is additional paid in capital.

Cash flow to Stockholders = Dividend paid - (Common stock in 2017 - Common stock in 2018)

Cash Flow to Stockholder = $150 - ($5,460 - $4,475)

Cash Flow to Stockholder = -$835.