The Ventura Company reported total stockholders\' equity of $500,000 at December

Question

The Ventura Company reported total stockholders' equity of $500,000 at December 31, 2008. In addition, there were 80,000 shares of common stock and zero shares of preferred stock outstanding for the entire year. During 2008, Ventura earned net income equal to $75,000, which included deductions of $7,000 for interest and $11,000 for income taxes. Total dividends paid to common stockholders during the year were $60,000. The company's statement of cash flows showed $56,000 in net cash inflows from operating activities and its stock was selling for $17 per share on December 31, 2008.

Explanation / Answer

The net cash from operating activity is a function of net income and adjustments for non cash and non operating items. The difference between the net operating cash flows and net income is due the such adjustments. Dividends paid to shareholders are a part of Cash flow from financing activity. Interest paid are appropriately CFO.

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