The March 15, 2010, edition of the Wall Street Journal includes an article by Martin Peers entitled “Media’s Cash Focus is Paying Dividends.”

Instructions Read the article and answer the following questions.

(a) What action did Viacom take with its excess cash before it decided to consider paying dividends or stock buybacks?

(b) What percentage of free cash flow does Time Warner pay out in dividends?

(c) Why might Viacom choose to pay a lower dividend and instead use its excess cash for a stock buyback program?

(d) How might the payment of a steady, significant dividend change the nature of shareholders that invest in media companies?

(e) What message might an increased dividend or stock buybacks send to shareholders regarding what the company will do with excess cash now, as opposed to what it used to do with excess cash?

INTERPRETING FINANCIAL STATEMENTS