Cash dividends : The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends. To discuss: The factors, which should be considered by the board of directors in deciding whether to declare a cash dividend for the last quarter of 2016

Question

Motion Designs Inc. has paid quarterly cash dividends since 20Y7. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.50 per share. The board of directors would like to continue this trend and is hesitant to suspend or decrease the amount of quarterly dividends. Unfortunately, sales dropped sharply in the fourth quarter of 20Y8 due to worsening economic conditions and increased competition. As a result, the board is uncertain as to whether it should declare a dividend for the last quarter of 20Y8. On October 1, 20Y8, Motion Designs Inc. borrowed $4,000,000 from Valley National Bank to use in modernizing its retail stores and to expand its product line in response to changes in its industry. The terms of the 10-year, 6% loan require Motion Designs to do the following: • Pay monthly interest on the last day of the month • Pay $400,000 of the principal each October 1, beginning in 20Y9 • Maintain a current ratio (current assets ÷ current…

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Chapter 11, Problem 11.5CP

(1)

To determine

Cash dividends: The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends.

To discuss: The factors, which should be considered by the board of directors in deciding whether to declare a cash dividend for the last quarter of 2016

(2)

To determine

To discuss: The issuance of a stock dividend from the point of view of (a) a stockholder and (b) the board of directors.

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Motion Designs Inc. has paid quarterly cash dividends since 20Y7. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.50 per share. The board of directors would like to continue this trend and is hesitant to suspend or decrease the amount of quarterly dividends. Unfortunately, sales dropped sharply in the fourth quarter of 20Y8 due to worsening economic conditions and increased competition. As a result, the board is uncertain as to whether it should declare a dividend for the last quarter of 20Y8. On October 1, 20Y8, Motion Designs Inc. borrowed $4,000,000 from Valley National Bank to use in modernizing its retail stores and to expand its product line in response to changes in its industry. The terms of the 10-year, 6% loan require Motion Designs to do the following: • Pay monthly interest on the last day of the month • Pay $400,000 of the principal each October 1, beginning in 20Y9 • Maintain a current ratio (current assets ÷ current…

Motion Designs Inc. has paid quarterly cash dividends since 20Y7. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.50 per share. The board of directors would like to continue this trend and is hesitant to suspend or decrease the amount of quarterly dividends. Unfortunately, sales dropped sharply in the fourth quarter of 20Y8 due to worsening economic conditions and increased competition. As a result, the board is uncertain as to whether it should declare a dividend for the last quarter of 20Y8.On October 1, 20Y8, Motion Designs Inc. borrowed $4,000,000 from Valley National Bank to use in modernizing its retail stores and to expand its product line in response to changes in its industry. The terms of the 10-year, 6% loan require Motion Designs to do the following:• Pay monthly interest on the last day of the month• Pay $400,000 of the principal each October 1, beginning in 20Y9• Maintain a current ratio (current assets ÷ current…

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