Question

Muffy's Muffins had net income of $2,325. The firm retains 60 percent of net income. During the year, the company sold $295 in common stock. What was the cash flow to shareholders?

Answer 1

The total cash flow to shareholders is $635.

Step-by-step explanation:

The cash flow to shareholders can be determined by subtracting the new equity raised from the dividend paid.

Cash flow to stockholder = dividend paid - new equity raised

Here net income = $2,325

Retained income = 60%

So the dividend percentage =40%

Total dividend = 2325 × 40% = $930

New equity raised= $295

Thus, total cash flow to shareholders= $930 – 295 = $635