Kovach Ltd.

(Kovach) is a publicly traded company. During its year ended March 31, 2014, Kovach reported a net loss of $12,000,000; declared and paid quarterly dividends of

$0.12 per share on its 120,000,000 outstanding common shares; and paid $5,000,000 in preferred dividends. During the year no shares were issued and none were repurchased from investors. On March 31, 2014, Kovach’s share price was $3.22.

Required:

a. Calculate the following ratios for 2014. Explain and interpret the meaning of each ratio:

i. basic earnings per share for fiscal 2014 il. price-to-earnings ratio on March 31, 2014 ii. dividend payout ratio for fiscal 2014

b. Explain how it’s possible for Kovach to pay a dividend when it reported a loss during fiscal 2014.

c. Explain why Kovach would have a share price greater than zero when the company is losing money.