1. Solution of BuyBack
So let's start out over here on the right hand side with the
equity schedule. The ending balance here of common equity, we can link this
over to the balance sheet here, $46 million there. Now we can link
in the beginning balance to the ending balance from year zero like this.
When we get here, all we need is a SUM function.
So we're gonna hit all equals for an auto sum and hit Enter.
Now we can grab this formula, highlight across Ctrl+R for fill right.
And this one across Ctrl+R as well. So this completes the corkscrew for
common equity. Now, let's look at retained earnings, so the ending balance
in year zero is over here, five million, that becomes the beginning balance
for year one like this. Net income, we should be able to link
that all the way over, we can actually link to the top of
the cash flow statement right here, which would be easy, and down here,
we use Alt+Equals for an auto sum. Again, now we can pull across
like this, Ctrl+R for fill right and hear a fill right as well.
Now we can see how a share buyback would impact the cash flow
schedule, we can link this all the way across to this particular line
right here, and then highlight across and Ctrl+R, and there's where we can
see the cash outflow on the cash flow statement. So now,
across to the balance sheet, and we wanna remember that the balance sheet
always shows ending balances. So when we're looking for equity capital,
we would then go across here for the year one ending balance.
For retained earnings, we go across for the year one ending balance as
well. Now that those are in place, we can highlight across,
hit Ctrl+R for fill right, we're all complete and we have a perfect
check at the bottom. So the main take we hear from this exercise
is that we can see with a share buyback, it obviously,
lowers equity capital by five million, we can also see that it's a
cash outflow and it would appear here in the cash from financing sections
right there.
2. Let's practice!