Evaluating the Composition of Shareholders’ Equity
The following schedule summarizes the components of shareholders’ equity reported in the year-end balance sheets of Nuclear Holdings and Hellmorgen:
(Dollars in millions)
Retained earnings (deficit)
Total shareholders’ equity
a. Which firm has obtained the larger amount of capital through sale of stock to investors?
b. Which firm has obtained the larger amount of capital through reinvestment of earnings?
c. Explain why Hellmorgen reports a negative (deficit) balance in retained earnings at the end of the year.
d. Suppose Nuclear Holdings earns $15,000 and pays dividends of $9,000 during the next year. What would be the firm’s ending balance in retained earnings? (All dollars are in thousands.)