US Airways had indefinitely deferred the quarterly dividend on its $358 million of cumulative convertible 9114 percent
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At the time, Berkshire Hathaway, the large company runs by Warren Buffett and the owner of the preferred stock, was not happy. However, US Airways was able to turn around, become profitable, and return to paying its cumulative dividends on preferred stock. Berkshire Hathaway was able to convert the preferred stock into 9.24 million shares of US Airways' common stock at $38.74 per share at a time when the market value had risen to $62.
What is cumulative convertible preferred stock? Why deferring dividends on those is shares a drastic action? What is the impact on profitability and liquidity? Why did using preferred stock instead of long-term bonds as a financing method probably save the company from bankruptcy? What was Berkshire Hathaway's gain on its investment at the time of the conversion?
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... 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...
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Principles of Accounting
ISBN: 978-0618736614
10th edition
Authors: Belverd Needles, Marian Powers, Susan Crosson
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