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?
$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.
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?
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
Which of the following is normally the largest asset of a manufacturing company?
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?
$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?
dividends. Net income is determined before dividends.
Book value of a corporation is also known as:
net tangible asset value per share. Book value is much easier to say.
Which of the following is considered an intangible asset?
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?
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?
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
common stock. Leverage refers to the existence of securities that are senior to common stock. There
can be debt leverage and equity leverage.