3. Financial statements and reports The income statement, also known as the profit and loss (PgL) statement, provides a snapshot of the financial performance of a company during a specified perlod of time. It reports a firm's gross income, expenses, net income, and the income that is avallable for distribution to its preferred and common shareholders. The income statement is propared using the generally accepted accounting principles (GAAP) that match the firm's revenues and expenses to the period in which they were incurred, not necessarily when cash was recelved or paid. Investors and analysts use the information given in the income statement and other financiat statements and reports to evaluate the company's financial performance and condition. Consider the following scenario: Fuzzy Button Cothing Company's income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next year. 1. Fuzzy Button is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBT). 2. The compary's operating costs (excluding depreciation and amortization) remain at 80% of net sales, and its depreciation and arnortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 40%6 of its pre-tax income or earnings before taxes (EBT). 4, In Year 2, Fuzzy Button expects to pay $100,000 and $1,071,000 of preferred and common stock dividends, respectively. Given the results of the previous income statement calcutations, complete the following statements: - In Year 2, if Fuzzy Button has 5,000 shares of preferred stock issued aod outstanding, then each preferred share should expect to receive in annual dividends. - If Fuzzy Button has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to in Year 2. - Fuzzy Button's before interest, taxes, depreciation and amortization (EBITDA) value changed from In Year 1 to in Year 2: - It is to say that Fuzzy Button's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual. contribution to retained earnings, $1,196,000 and $1,506,500, respectively. This is because of the items reported in the incorne statement involve payments and receipts of eash