Evaluate the plan to skip the dividend

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Metro Bus Company had $400,000 of revenue and $401,000 of expense (including depreciation) for the current year resulting in a $1,000 net loss. All revenues were received in cash. All expenses were paid in cash except for depreciation of $181,000. The Balance sheet reveals $225,000 of Cash and $1,775, 000 of other assets. The Company has no debt and all of the busses are modern - there is no plan to purchase more busses. Although there are sufficient retained earnings, Management has decided to skip the normal $25,000 dividend to the stockholders - "with a $1,000 net loss. Management feels there is not enough cash for the dividend."

What is the Company's Cash flow? What is the difference between cash flow and net income? Evaluate management’s statement: "with a $1,000 net loss. Management feels there is not enough cash for the dividend." Evaluate the plan to skip the dividend.

Reference no: EM13824081

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