hfc ltd’s shareholders, Accounting Basics

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HOME Finance Company Limited made an after-tax profit of $3.172 million for the year ended June 30, 2008.

Chairman James Datta said this was a milestone for the company, with a dividend payout of $2.855m to shareholders.

Mr Datta said the key to their improved performance were a reduction in expenses, increase in income and running the overall organisation in a very tight manner.

This is the first time the company has adopted the International Financial Reporting Standard (IFRS) for the financial year and was able to achieve these results through effective management of its liquidity, interest rate risks and containment of operating costs in the main compared to previous years, he said.

Required:

a)   Consider the following syllogism:

Premise 1:    When a company reports higher profits, shareholders get a dividend payout.
Premise 2:    HFC Ltd makes an after-tax profit of $3.172 million for the year.
Conclusion:     HFC Ltd shareholders get a dividend payout.
Comment on the syntax and semantics of the above syllogism.

b)    Explain whether the HFC Ltd brandname can be recognized as an asset.

c)     Explain the nature of the dividend to HFC Ltd’s shareholders from the point of view of the following theories:
•    Entity Theory
•    Fund Theory

d)     Explain which “form of measurement” is employed in calculating the profit of $3.172 million?

 

 

 

 


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