The Bubba Corporation has 900,000 of common outstanding and holds 100,000 shares as treasury
stock. At the end of the third quarter $450,000 is distributed as a dividend on the common.
How much is the dividend per share?
A
Explanation:
$0.45. Since treasury stock does not receive dividends, divide $450,000 by the outstanding 100,000
shares to arrive at $0.45 per share.
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A large manufacturing company has current assets of approximately $9,400,000 and current
liabilities of about $4,900,000.
Which of the following statements is true about the current ratio?
B
Explanation:
it is somewhat below the standard minimum. The standard minimum current ratio for a
manufacturing company is 2 to 1. The current ratio for this company is 1.92 (9,400,000 divided by
4,900,000).
Which of the following is normally the largest asset of a manufacturing company?
B
Explanation:
Inventory. A manufacturer will normally have more inventory than accounts receivable and notes
receivable. Sales is not an asset category.
Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred
stock ($100 par value) and 400,000 shares of common stock ($10 par value).
What are the earnings per share of common stock?
A
Explanation:
$8.50. Subtract the preferred dividend of $800,000 (100,000 x 8% x 100) from the net income. Divide
the result of $3,400,000 ($4,200,000 - $800,000) by the 400,000 common shares to obtain $8.50.
Which of the following items is not deducted to determine a corporation’s net income?
B
Explanation:
dividends. Net income is determined before dividends.
Book value of a corporation is also known as:
A
Explanation:
net tangible asset value per share. Book value is much easier to say.
Which of the following is considered an intangible asset?
B
Explanation:
trademarks. Intangible assets are those whose true value cannot be determined, but there is some
supposed market value.
A company earns $6 per share and pays out 20% in common stock dividends.
What does the stock yield if it sells at $30 per share?
B
Explanation:
4%. The dividend is $1.20 per share ($6 x 20%). Divide this by the stock price to obtain the yield.
Which of the following best describes depreciation?
B
Explanation:
deductions from gross income to offset lower value of equipment. Depreciation is the deduction of
costs for capital assets as their value declines.
A leveraged company is best described as one that has a small portion of its capitalization
represented by:
A
Explanation:
common stock. Leverage refers to the existence of securities that are senior to common stock. There
can be debt leverage and equity leverage.