Question

Kovach Ltd. is a publicly traded company. During its year ended December 31, 2017 Kovach reported a net loss of $37,500,000. During fiscal 2017 Kovach declared and paid four quarterly dividends of $0.05 per share on its 24,000,000 outstanding common shares.
During the year no shares were issued and none were repurchased from investors. In addition, Kovach paid $5,000,000 in preferred dividends. On December 31, 2017
Kovach's share price was $6.75.

Required:
a. Calculate the following ratios for 2017. Explain and interpret the meaning of each ratio:
i. basic earnings per share for fiscal 2017
ii. price-to-earnings ratio on December 31, 2017
iii. dividend payout ratio for fiscal 2017
iv. dividend yield on December 31, 2017
b. Explain how it's possible for Kovach to pay a dividend when it reported a loss during fiscal 2017.
c. Explain why Kovach would have a share price greater than zero when the company is losing money. Why is its dividend yield positive even though the company is losing money?



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  • CreatedFebruary 26, 2015
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