Purchase Solution

Maximum Amount of Dividend and Stockholders Equity

Not what you're looking for?

Ask Custom Question

Your corporation has the following stockholders equity.

Common Stock at par $ 750,000
Paid in capital in excess of par 1,250,000
Retained earnings 2,500,000
Total $ 4,500,000

a. What is the maximum amount of dividends the corporation can pay in states where the firm's legal capital is defined as the par value of its common stock?
b. How does your answer change if the firm is in a state where legal capital includes all paid-in capital?

Purchase this Solution

Solution Summary

The solution explains the maximum amount of dividends that can be paid given the constraints of legal capital.

Solution Preview

A firm cannot pay dividends from its legal capital.

a. If the legal capital is the par value of the common stock, then the amount ...

Purchase this Solution


Free BrainMass Quizzes
Lean your Process

This quiz will help you understand the basic concepts of Lean.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Motivation

This tests some key elements of major motivation theories.