Question
Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as
Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as follows:
|
|
|
|
| Assets | ||
| Cash | $ | 335,000 |
| Accounts receivable |
| 811,000 |
| Fixed assets |
| 989,000 |
|
| ||
| Total assets | $ | 2,135,000 |
|
| ||
| Liabilities and Stockholders' Equity | ||
| Accounts payable | $ | 472,000 |
| Long term payable |
| 280,000 |
| Common stock (290,000 shares at $2 par) |
| 580,000 |
| Retained earnings |
| 803,000 |
|
| ||
| Total liabilities and stockholders' equity | $ | 2,135,000 |
|
| ||
a-1. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)
|
| |||
|
a-2. Is this realistic?
|
| Yes |
|
| No |
b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)
|
| |||
|
c. Assume the firm earned an 10 percent return on stockholders equity last year. If the board wishes to pay out 40 percent of earnings in the form of dividends, how much will dividends per share be
Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as follows:
|
|
|
|
| Assets | ||
| Cash | $ | 335,000 |
| Accounts receivable |
| 811,000 |
| Fixed assets |
| 989,000 |
|
| ||
| Total assets | $ | 2,135,000 |
|
| ||
| Liabilities and Stockholders' Equity | ||
| Accounts payable | $ | 472,000 |
| Long term payable |
| 280,000 |
| Common stock (290,000 shares at $2 par) |
| 580,000 |
| Retained earnings |
| 803,000 |
|
| ||
| Total liabilities and stockholders' equity | $ | 2,135,000 |
|
| ||
a-1. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)
|
| |||
|
a-2. Is this realistic?
|
| Yes |
|
| No |
b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)
|
| |||
|
c. Assume the firm earned an 10 percent return on stockholders equity last year. If the board wishes to pay out 40 percent of earnings in the form of dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)
|
| |||
|
? (Do not round intermediate calculations and round your answer to 2 decimal places.)
|
| |||
|
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
