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Dvidend policy

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6. The Mori Egg Noodle Company has the following equity accounts on its balance sheet:

Common stock ($10 par, 300,000 shares $ 3,000,000
Contributed capital in excess of par 1,500,000
Retained earnings 6,000,000
Total common stockholder's equity $10,500,000

a. What is the maximum amount of dividends that may be paid by the Mori Company if the capital impairment provisions of state law are limited to the following?
i. The par value of common stock
ii. The par value and the capital in excess of par accounts

b. What other factors may limit Mori's ability to pay dividends?

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Dividend Policy
Firm's Ability to Pay Dividend depends on its funds requirements for growth, shareholders' desire and liquidity. A growth firm should set its dividend rate at a low level (because of its high needs for funds) and move towards its target slowly.

Practical consideration for payment of dividend are ...

Solution Summary

This explains the dividend policy and steps to estimate the amount of dividend