Given the Financial Information for the
A $\quad$ $\quad$

Given the financial information for the
A.E. Neuman Corporation,
A) Prepare a Statement of Cash Flows for the year ended December 31, 2005.
B) What is the dividend payout ratio?
C) If we increased the dividend payout ratio to 100%, what would happen to retained earnings? A.E. Neuman Corporation $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Balance Sheets

$\begin{array}{lcc} \text { ASSETS}&2004&2005\\\text { Cash } & \$ 45,000 & \text { \$ } 50,000 \\ \text { Marketable Securities } & 175.0001 & 60,000 \\ \text { Accounts Receivable } & 240,000 & 220,000 \\\text { Inventories } & 230,000 & 275,000 \\ \text { Investments } & 70,000 & 55.000 \\ \text { Total current assets } & 760,000 & 760,000 \\ \text { Plant and Equipment } & 1,300,000 & 1,550,000 \\ \text { Less Accumulated Amortization } & 450,000 & 600,000 \\\text { Net Plant and Equipment } & 850,000 & 950.000 \\\text { Total Assets } & { \$ 1 , 6 1 0 , 0 0 0 } & \$ 1.710 .000 \\\end{array}$ $$\begin{array}{l}\text { LIABILITIES AND SHAREHOLDERS' EQUITY }\\\begin{array} { l r r r } \text { Accounts Payable } & \$ 110,000 & \$ 85,000 \\\text { Notes Payable } & 65,000 & 10,000 \\\text { Accrued Expenses } & 30,000 & 5,000 \\\text { Income Taxes Payable } & 5,000 & 10,000 \\\text { Bonds Payable (2016) } & 800,000 & 900,000 \\\text { Common Stock (100,000 shares) } & 200,000 & 200,000 \\\text { Retained Earnings } & 400,000 & 500,000 \\\text { Total Liabilities and } & & \\\text { Shareholders' Equity } & \$ 1.610,000 & \$ 1.710,000 \\\hline\end{array}\end{array}$$ $\begin{array}{c}\text { A.E. Neuman Corporation}\\\text { Income Statement For Year Ended December}\\\begin{array}{lr}\text { Sales } & \$ 5,500,000 \\\text { Less: Cost of Goods Sold } & 4,200,000 \\\text { Gross Profit } & 1,300,000 \\\text { Less: Selling, General \& Administrative Expense } & 260,000\\\text { Operating Profit } & 1,040,000 \\\text { Less: Amortization Expense } & 150,000 \\\text { Earnings Before Interest and Taxes } & 890,000\\\text { Less; Interest Expense } & 90,000\\\text { Earnings Before Taxes } & 800,000 \\\text { Less: Taxes }(50 \%) & 400,000 \\\text { Net Income } & \$ 400,000 \\\end{array}\end{array}$