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Electric Company omitted all its preferred stock dividends indefinitely in an

Electric Company omitted all its preferred stock dividends indefinitely in an effort to improve liquidity. All of the company's cumulative preferred stock was affected. According to the Wall Street Journal, "Some interpreted the drastic action as a requisite for the cash-strapped utility to secure a new credit agreement. . . . If the credit agreement falls through, the omission of preferred-stock dividends would suggest People's Electric is perilously close to filing for bankruptcy." What is cumulative preferred stock? Why is the omission of dividends on those shares a drastic action? If new bank financing is not obtained, why would the company have to consider declaring bankruptcy?

 

 

182.Duncan Corporation has 2,000 shares of $100 par value, 6 percent cumulative preferred stock and 20,000 shares of $10 par value common stock outstanding. In its first four years of operation, Duncan Corporation paid cash dividends as follows: 20x5, $15,000; 20x6, $0; 20x7, $20,000; 20x8, $25,000. Calculate the total cash dividends received by owners of preferred and common stock in each year.

 

 

183.Gledhill Corporation has 30,000 shares of $10 par value, 7 percent cumulative preferred stock and 50,000 shares of $100 par value common stock outstanding. In its first four years of operation, Gledhill paid cash dividends as follows: 20x1, $25,000; 20x2, $0; 20x3, $30,000; 20x4, $50,000. Calculate the total cash dividends received by owners of preferred and common stock in each year.

Dec 10 2019 View more View Less

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