CanaCo showed the following equity on its December 31, 2023, balance sheet:
Contributed capital

The shareholders of CanaCo expressed concerns to the board of directors at the recent annual meeting that the market price of their shares has not changed significantly over the past 18 months, yet the company is very profitable. Profit for each of the past three years has been $1,800,000, $2,300,000, and $3,500,000, respectively. Cash dividends were paid in each of these years equal to 50% of profit.

Required
Using the elements of critical thinking described on the inside front cover, comment. Consider the following subheadings to organize your response, and try to really think about the complexity of share prices. What really will affect share prices?

• Problem
• Goal
• Principles
• Facts
• Conclusions

Transcribed Image Text:

Preferred shares, $2 non-cumulative Authorized: 50,000 Issued and outstanding: 0 Common shares Authorized: Unlimited Issued and outstanding: 50,000 Total contributed capital Retained earnings Total equity 6,800,000 $ 6,800,000 3,800,000 $10,600,000