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3. Income statement The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the finandal performance of a company

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3. Income statement The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the finandal performance of a company during a specified period of time. It reports a firm's gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared 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 received or paid. Investors and analysts use the information given in the income statement and other financial statements and reports to evaluate the company's financial performance and condition Consider the following scenario: Blue Hamster Manufacturing Inc'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. Blue Hamster is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before Interest and taxes (EBIT) 2. The company's operating costs (excluding depreciation and amortization) remain at 65% of net sales, and its depreciation and amortization expenses remain constant from year to year 3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Blue Hamster expects to pay $200,000 and $2,280,656 of preferred and common stock dividends, respectively. Complete the Year 2 Income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar Blue Hamster Manufacturing Inc. Income Statement for Year Ending December 31 Year 1 Year 2 (Forecasted) S $30,000,000 19,500,000 1,200,000 $9,300,000 1,200,000 5 Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating Income (or EBIT) Less: Interest expense Pro-tax income (or EBT) Less: Taxes (259) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Les Common stock dividends Contribution to retained earnings 930,000 8,370,000 5 2,092,500 $6,277,500 200,000 6,077,500 1,883,250 $4,194,250 $5,121,531 Given the results of the previous Income statement calculations, complete the following statemente In Year 2, if Blue Hamster has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Blue Hamster has 400,000 shares of common stock issued and outstanding, then the firm's earrings per share (EPS) is expected to change from In Year 1 to in Year 2 Blue Hamster's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2 . It is to say that Blue Hamster'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, $4,194,250 and $5,121,531, respectively. This is because of the item is reported in the income statement involve payments and receipts of cash Given the results of the previous Income statement calculations, complete the following statements: $60.00 In Year 2, if Blue Hamster has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. ster 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 $40.00 br's earnings before Interest, taxes, depreciation and amortization (EBITDA) value changed from In Year 1 to in Year 2 $80.00 to say that Blue Hamster's net inflows and outflows of cash at the end of Years 1 and 2 ate equal to the company's annual $100,00 to retained earnings, $4,194,250 and $5.121,531, respectively. This is because of the items reported in the income statement involve payments and receipts of cash 2 GIN $23.25 sults of the previous income statement calculations, complete the following statements: $15.19 $15.69 Blue Hamster has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. $20.93 Inster has 400,000 shares of common stock issued and outstanding, then the firm's camins per share (EPS) is expected to change from in Year 1 to in Year 2. Blue Hamster's earnings before interest, taxes, depreciation and amortization (EBITDA) valut changed from in Year 2 It is to say that Blue Hamster'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. $4,194,250 and $5,121,531, respectively. This is because of the items reported in the income statement involve payments and receipts of cash. in Year 1 to $5,121,531 $18.51 Given the results of the previo statement calculations, complete the following statements: $29.81 In Year 2, If Blue Hamster 1 $25.34 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual $19.01 If Blue Hamster has 400,00 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 Blue Hamster's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Yeur 1 to In Year 2 . It is to say that Blue Hamster'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, $4,194,250 and $5,121,531, respectively. This is because of the items reported in the income statement involve payments and receipts of cash. Given the results of the previous income statement calculations, complete the following statements: $39,288,750 Hamster has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive $31.977.187 n annual dividends. $19,527,187 has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from Year 1 to In Year 2 Jarnings before interest, taxes, depreciation and amortization (EBITDA) value changed from In Year 1 to in Year 2 to say that Blue Hamster'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, $4,194,250 and $5,121,531, respectively. This is because of the items reported in the income statement involve payments and receipts of cash. $13,125,000 It is Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Blue Hamster has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Blue Hamster has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from correct Year 1 to In Year 2 arnings before interest, taxes, depreciation and amortization (EBITDA) value changed from Incorrect In Year 2 . It is to say that Blue Hamster's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retalted earnings. $4,194,250 and $5,121,531, respectively. This is because of the tenis reported in the income statement involve payments and receipts of cash. Blue in Year 1 to Given the results of the previous income statement calculations, complete the following statements: In Year 2. If Blue Hamster has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Blue Hamster 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. Blue Hamster's earnings before interest, taxes, depreciation and amortization (EBITDA) valud all In Year 1 to In Year 2. It is to say that Blue Hamster's net inflows and outflows of cash at the end 2 are equal to the company's annual contribution to retained earnings, $4,194,250 and $5,121,531, respectively. This is because of the items reported in the income statement involve payments and receipts of cash. In all but one

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