Retained Earnings are equal to the sum of Beginning Retained Earnings and Net Income, with the difference being the Dividends.
To find the retained earnings for a year with only the net income available, you need to consider the following steps:
Determine the beginning retained earnings: If you have the beginning retained earnings balance from the previous year's financial statements, use that figure. Otherwise, assume it as zero.
Calculate dividends paid: If information about dividends paid during the year is available, subtract the total dividends paid from the net income. Dividends represent the portion of earnings distributed to shareholders and reduce retained earnings.
Adjust for any prior period adjustments: If there are any prior period adjustments or corrections, make the necessary adjustments to the net income.
Add net income and subtract dividends: Add the net income for the year to the beginning retained earnings. Then, subtract any dividends paid during the year.
Retained Earnings = Beginning Retained Earnings + Net Income - Dividends
The resulting figure will be the retained earnings for that year.
In summary, to find retained earnings with only the net income for the year, you need to consider the beginning retained earnings, dividends paid, and any prior period adjustments.
By adding the net income and subtracting dividends from the beginning retained earnings, you can calculate the retained earnings for that year.
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Small Business Management (1)
There are at least eight different pricing strategies for established goods and services. Explain FOUR (4) of those strategies and under what conditions a business owner should use them.
The four pricing strategies commonly used by businesses for established goods and services are Penetration Pricing, Skimming Pricing, Premium Pricing and Bundle Pricing.
Here are four pricing strategies commonly used by businesses for established goods and services, along with the conditions under which they can be applied:
Penetration Pricing: Penetration pricing involves setting a low initial price for a product or service to quickly capture market share. This strategy is typically used when a business wants to enter a competitive market or launch a new product. Skimming Pricing: Skimming pricing is the opposite of penetration pricing. It involves setting a high initial price for a product or service and gradually lowering it over time. This strategy is often employed for products with unique features or a competitive advantage. Premium Pricing: Premium pricing involves setting a higher price than competitors to position the product or service as exclusive or of higher quality. This strategy is commonly used when a business wants to create a perception of luxury, prestige, or uniqueness. Bundle Pricing: Bundle pricing involves packaging multiple products or services together and offering them at a discounted price compared to purchasing each item individually. This strategy encourages customers to buy more items by providing them with a perceived value or cost savings.For such more question on Penetration:
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Mr. Johnnie B. Good has a furniture business which he operates as a sole proprietor. The business has been doing well for several years and now he wants to finance the expansion of his business by way of a loan and he is thinking of approaching BCN Bank accordingly. He is also planning to buy a great deal of raw material on credit from Miller’s Hardware in support of the business expansion. Mr. Good in looking at the potential risks to his personal assets and in an effort to safeguard himself from losing his personal assets if the business failed and was not able to repay the loan or pay for the material he got on credit, filed the relevant documents with the companies office and incorporated a private company, Good Furniture Ltd, with him as the sole shareholder and director and then went ahead and obtained a loan in the company’s name from the bank and bought the raw material on credit on behalf of the company. The bank in providing the loan ensured that Mr. Good signed a personal guarantee for the entire loan amount.
Shortly after receiving the loan and the material on credit, the business faced severe competition from other furniture stores who imported much cheaper furniture and so the business failed and had no business assets to cover the loan or to pay for the material taken on credit.
BCN Bank and Miller’s Hardware both sue to recover their respective amounts and each is seeking to get a court order to have Mr. Good sell his personal assets to meet the obligations of Good Furniture Ltd. Both Claimants are contending that the ‘one man’ company is merely a shield to what is in essence a sole proprietorship business.
Using case law and statute, advise Mr. Good as to the likelihood of success of:
A) Miller’s Hardware
B) BCN Bank
A) Miller's Hardware: Unless Miller's Hardware can prove fraudulent intent or abuse of the corporate form, it's unlikely to hold Mr. Good personally liable.
B) BCN Bank: Mr. Good's personal guarantee strengthens BCN Bank's chances of success in recovering the loan amount from his personal assets.
Mr. Good's situation involves the concept of piercing the corporate veil, which refers to disregarding the separate legal personality of a corporation to hold its shareholders personally liable. In this case, Miller's Hardware and BCN Bank are seeking to hold Mr. Good personally liable for the debts of Good Furniture Ltd. Let's analyze the likelihood of success for each claimant:
A) Miller's Hardware:
To determine the likelihood of success for Miller's Hardware, we need to consider the circumstances under which the court may pierce the corporate veil. The court will generally pierce the corporate veil if it can be shown that the company is merely an alter ego or a sham used to avoid legal obligations.
Factors considered include commingling of assets, inadequate capitalization, failure to follow corporate formalities, and fraud.
In this case, since Mr. Good incorporated Good Furniture Ltd as a separate legal entity, it demonstrates an intention to operate as a company rather than a sole proprietorship.
Unless Miller's Hardware can provide evidence of fraudulent intent or other factors indicating abuse of the corporate form, the court is unlikely to pierce the corporate veil. Therefore, Miller's Hardware may face challenges in holding Mr. Good personally liable.
B) BCN Bank:
BCN Bank has an advantage over Miller's Hardware because Mr. Good signed a personal guarantee for the loan, assuming personal liability. A personal guarantee is a legally binding agreement, and it can override the protection of limited liability that a corporation provides.
As long as the personal guarantee is valid and enforceable, BCN Bank has a strong chance of success in recovering the loan amount from Mr. Good's personal assets.
In summary, Miller's Hardware may face difficulties in holding Mr. Good personally liable, while BCN Bank is likely to succeed based on the personal guarantee provided by Mr. Good.
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As an aid to a congressman, provide an essay that addresses the following: Identify and summarize three fiscal policy tools that the federal government may use to combat a inflation. Explain how each tool may reduce the recession and how it impacts employment and growth.
Fiscal policy refers to the government's decisions on taxes, public spending, and borrowing that impact the economy. The government uses fiscal policy to combat inflation. To do this, the government uses a variety of tools to stimulate economic growth.
Below are the three fiscal policy tools that the federal government may use to combat inflation:
Taxation: Taxation is a fiscal policy tool that the government may use to reduce inflation. The government can increase taxes to reduce the disposable income of individuals and businesses, thereby reducing their spending. In turn, this decreases the demand for goods and services, which reduces the prices and prevents inflation.
Also, an increase in taxes can help the government raise funds, which can be used to finance government spending. Government spending: The government can use government spending as a tool to control inflation. The government can increase its spending on public goods and services.
This increases the demand for goods and services, which stimulates economic activity and helps to reduce unemployment. Additionally, it increases disposable income, thereby increasing consumption. The increased demand may lead to inflation, so the government may use other policies to control inflation, such as taxation or monetary policy.
Borrowing: The government can use borrowing to control inflation. The government borrows money from banks and other financial institutions to finance public projects. The borrowing increases the money supply in the economy, which stimulates economic activity and reduces unemployment.
Additionally, it increases disposable income, which increases consumption. However, excessive borrowing may lead to inflation, so the government must ensure that the amount of borrowing is reasonable.
In conclusion, fiscal policy tools such as taxation, government spending, and borrowing can be used to control inflation. The government can use these tools to reduce the demand for goods and services, stimulate economic activity, increase disposable income, and reduce unemployment.
However, the government must use these tools carefully and effectively to achieve the desired results and avoid any negative impact on the economy.
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