Class Notes (811,060)
Canada (494,467)
York University (33,712)
ADMS 2500 (47)
all (8)


3 Pages
Unlock Document

York University
Administrative Studies
ADMS 2500

Shareholders Equity Practice Problem SolutionsProblem 1Multiple choice1 cWhile a company can suggest a price for its shares it is the market that ultimately determines the price During any given day there can be a wide range in price paid The newspaper stock section reports for each stock the high low average and closing price 2 aAs the Retained Earnings account has grown so have the firms net assets but these assets are likely to be invested in the plant not in cash and temporary investments The firm is unlikely to be able to generate cash in the amount of retained earnings for paying dividends If the firm has regularly declared stock dividends to capitalize into the contributed capital accounts amounts permanently invested in plant assets then the balance in the Retained Earnings account might be a better indicator of the ability to pay cash dividends But then of course the Retained Earnings account would have a smaller balance 3 cShareholders do not lose out in any fundamental sense by not receiving dividends since their equity in the firm increases absolutely not proportionately as a result and presumably the market price of the shares increases Furthermore a set of personal income taxes is saved Not declaring a dividend does simplify raising additional capital4 b In the case of a cash dividend the shareholder now holds the investment in two partscash and share certificates The sum of the cash and the book value of the shares after the dividend declaration is equal to the book value of the shares before the dividend is declared It is common to speak of a cash dividend as income but it is merely the convers
More Less

Related notes for ADMS 2500

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.