As of December 31, 2008, Biloxi Corporation has 10,000 shares of 8%, $100 par value cumulative preferred stock outstanding. Biloxi has not paid any dividends to its stock- holders during the past three years.
(a) What disclosure must Biloxi make in its annual report regarding the unpaid dividends on its preferred stock? What amount will be included in the disclosure, and how was that amount calculated?
(b) Where in Biloxi’s financial statements will this disclosure be found?
(c) Why is this disclosure of interest to Biloxi’s preferred and common stockholders?
(d) Assume that in February 2009 Biloxi declares a $500,000 cash dividend. How much will be received by Biloxi’s common stockholders? If Biloxi has 250,000 shares of common stock outstanding, what is the dividend amount per common share?
(e) Use the information in part (d). If the market price per common share is $18, what is the dividend yield per common share? How would an investor determine if this yield is ‘‘good’’ or ‘‘bad’’?

  • CreatedMarch 27, 2015
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