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3. Problem 14-04

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Problem 14-04

You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firms financial statements:

Year 20X1 20X2 20X3

Operating income $ 19,000,000 $ 15,000,000 $ 17,000,000

Interest 7,300,000 5,100,000 9,500,000

Taxes 3,700,000 5,300,000 5,000,000

Preferred dividends 1,500,000 1,300,000 800,000

Common dividends 1,700,000 2,900,000

Round your answers to two decimal places.

20X1:

20X2:

20X3:

What does your analysis indicate about the firms capacity to pay preferred stock dividends?

Times preferred dividend earned has each year, which indicates the firm's capacity to pay the dividend has .