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sir i have a doubt in first part of part a ,how have they calculated the retained earnings? and for 2nd part of part a why have they take cash as the balancing figure why are we not adding to cash as shares are issued? like the 15 & 30 million? and again how ar they calculating the retained earnings here?
thanks alotThe retained earnings in the SOFP at 30 June 2015 were 2.6M. The forecast retained earnings for 2016 are 2.4M, and therefore the total retained earnings at 30 June 2016 are 2.4 + 2.6 = 5M.
If there is refinancing, then yes – they do receive cash from the issue of shares. However they are spending it on non-current assets etc.. See note 5 of the question 🙂
Good evening John,
I was confused about the cash reduced to 0 while retain earning up to 5 $M in year 2016.
I thought if Gupte VC exercises the right, 10 $M repurchased by Flufftort will be funded by the current retain earning 2.6 + original cash holding 7.6.
It will leave 0.2 balance. (7.6+2.6-10)
(Obvious I got the wrong answer)As your explanation, 2.4+2.6 =5 (current retain earning + next year retain earning) is for year 2016 retain earning on FP, how about the cash?
If we supposes 7.6 will be used up to fund the repurchase share.
They are still short of 2.4 $M for the repurchase.Thanks in advance!
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