Question
You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear,
You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firms financial statements:
Year 20X1 20X2 20X3 Operating income $ 18,000,000 $ 19,000,000 $ 14,000,000 Interest 6,100,000 8,800,000 7,500,000 Taxes 5,900,000 5,500,000 4,400,000 Preferred dividends 1,000,000 1,200,000 900,000 Common dividends 2,700,000 2,900,000
Round your answers to two decimal places.
20X1:
20X2:
20X3:
What does your analysis indicate about the firms capacity to pay preferred stock dividends?
Times preferred dividend earned has -Select- Declined or increased each year, which indicates the firm's capacity to pay the dividend has -Select- . diminished or improved
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