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a se Ch 03: Assignment - Financial Statements, Cash Flow, and Taxes Back to Assignment Attempts: Keep the Highest 17 3. Income statement Aa The income statement, also known as the profit and loss (PAL) statement, provides a shot of the financial performance of a company during a specified period of time. It reports a fin's gross income, experes, 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 (GAP) 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: Cold Goose Metal Works Inc.'s income statement reports data for its first year of operation. The firm's CEO would the sales to increase by 25 next year. 1. Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of carmings before interest and taxes (EBIT) 2. The company's operating costs (excluding depreciation and amortization) remain at 65of net sales and its depreciation and amortization expenses remain constant from year to year 3. The company's tax rate remains constant at 40% of its pre-tax income or earings before tames (ET) 4. In Year 2, Cold Goose expects to pay $100,000 and 51.773,844 of preferred and common stock dividends, respectively whole Complete the Year 2 income statement data for Cold Goose, the answer the questions that follow. Be sure to round each dolar value to the dollar Cold Goose Metal Works Inc. Ch 03: Assignment - Financial Statements, Cash Flow, and Taxes Cold Goose Metal Works Inc. Income Statement for Year Ending December 31 (Forecasted) 1,000,000 Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating Income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Lass: Taxes (40%) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less: Common stock dividends Contribution to retained eamings $25,000,000 16,250,000 1,000,000 57,750,000 775,000 6,975,000 2,790,000 54,185,000 100,000 4,085.000 1,464,750 52,620,250 $3,194,281 Given the results of the previous income statement calculations, complete the following statements In Year 2, Cold Goose has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends If Cold Goose has 500,000 shares of common stock issued and outstanding, then the firm's camnings per share (EPS) is expected to change from in Year 1 to in Year 2 in Year 1 to Cold Goose's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2 It is to say that cold Goosent inflows and outflows of cash at the end of Years 1 and 2 are equal to the companyamal contribution to retained earings, 52,620,250 and 53,194,261, respectively. This is because of the item reported in the Income statement involve payments and receipts of cash

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