A firm has $800,000 in paid in capital, retained earnings of $40,000 (including the current years earnings), and 25,000 shares of common stock outstanding In the current year, it has $29,000 of earnings available for the common stockholders a What is the most the firm can pay in cash dividends to e...

a Maximum dividend b A 20000 decrease in cash and ...

A firm has $800,000 in paid-in capital, retained earnings of $40,000 (including the current years earnings), and

Question:

A firm has $800,000 in paid-in capital, retained earnings of $40,000 (including the current year’s earnings), and 25,000 shares of outstanding. In the current year, it has $29,000 of earnings available for the common stockholders.
a. What is the most the firm can pay in cash dividends to each common stockholder?
(Assume that legal capital includes all paid-in capital.)
b. What effect would a cash of $0.80 per share have on the firm’s entries?
c. If the firm cannot raise any new funds from external sources, what do you consider the key constraint with respect to the magnitude of the firm’s payments? Why?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...