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TA Notes 4.12.2010

TA Notes 4.12.2010 - • Cash is reduced when you pay...

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Tresury stock: when a company buys stock back. Does not pay dividends. Carries a debit balance. Reduces the value of the company Why are preferred stocks preferred: they get their dividends first. Four features of preferred stock o Cumulative: if a company didn’t pay a dividend in yr one and they pay one in year 2 you are entitled to dividends for one and two. o Convertible: The stock can be converted to common stock at a specified price o Callable: the company can buy back stock at their leisure o Participating: After the preferred get theirs and common shareholders get theirs if there is any remainder it is divided between the twi Two requirements for dividends companies must have cash or other assets to pay the dividends and they need to have retained earnings Know DIVIDEND PAYOUT ratio: Annual dividend amount/total income Retained earnings is reduced when you declare divans
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Unformatted text preview: • Cash is reduced when you pay dividends Declaration Retained Earnings Dividends Payment Cash Dividend Payable Cash Sticker company declares a $70,000 dividend in 2008 (no dividends were paid in 2006 or 2008). There are 10,0000 shares of of $10 par 8 % preferred stock and 40,0000 shares of $5 par common stock outstanding • Preferred shareholders dividend .80 per share, 10,000 shares= 8,000 • If non cumulative o Preferred shareholders get 8,000 o Common stockholders get 62,000 • If cumulative o Preferred shareholders 24,000 o Common shareholders 46,0000 • Stock dividend when Jones company pays a dividend in shares of Jones company • Large stock dividend is over 20 percent : done only at par nothing goes to additional paid in capital • Dividend deducted from retained earnings...
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