Harish Company Financial statement
Harish Company is currently unable to pay the $28,000 dividend. This is because the company has only $4000 cash available at that time. The company can only pay if the cash available is more than the dividends to be paid. The available cash of $4000 is not able to pay the $28,000.
There are many factors that will cause the net income to differ from the cash provided by the operation in a short run. For example the different revenues and expenses may have occurred in the process but not refunded yet to the company. Therefore, in Harish’s case, it is clear that $15,000 of the revenues have not been collected yet, causing an increase in the amount receivable. Moreover, $1000 of the rent cost has not been paid as evident by the rent payable liability section of the company’s balance sheet. Additionally, other expenses such as payment of loans and other debts of the company are possible to cause a difference. Therefore, in most cases there is always a difference between the net income and the cash the business have during a particular period.
In addition to the operating activities and duties, a business will definitely expand in cash through various investing activities such as investment securities options, buying and selling of properties and minimizing debts. Moreover, a business can also engage in various financial activities that can either be a source or use of cash. For example, giving out stock, borrowing and repayment of loans, and paying dividends. Additionally, a business can consider the path of increasing making their market share stable so that many people can invest with the company in the purchase of the shares.