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MFC Corporation has 100,000 shares of stock outstanding. Below is part of MFC's Statement of Financial Position for the last fiscal year.
What is the maximum amount MFC can pay in cash dividends per share and maintain a minimum current ratio of 2 to 1? Assume that all accounts other than cash remain unchanged.
Suggested Answer: B
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Choice 'b' is correct. The current ratio is found by dividing current assets by current liabilities. Presently current assets are:
Because current liabilities must be two times current liabilities, the current assets cannot go below $1,800,000. Thus current assets can go down:
On a per share basis this is $250,000 / 100,000 shares or $2.50 per share.
Choices 'a', 'c', and 'd' are incorrect, per the above calculation.
8 comments · newest first
BO
Bobbye
11 months ago
$2.05 sounds about right to me!
SA
Samira
12 months ago
Wait, how can they maintain a 2:1 ratio with that?
AL
Alida
12 months ago
Definitely not $3.80, that's too high!
DA
Darell
12 months ago
I think they can pay $2.50 per share.
TO
Toshia
1 year ago
MFC has 100,000 shares outstanding.
EU
Eugene
1 year ago
This one seems pretty straightforward. I'm going to go with C - Client Access License.
MI
Mitsue
1 year ago
Hmm, I'm not totally sure about this one. I know the schedule variance and SPI are important indicators, but I'm not sure how to put them together to determine the overall project performance. I'll have to think this through carefully.
ME
Melissa
1 year ago
I'm a bit unsure about the final probability. I think it might be closer to 0.0228, but I'm not completely confident about the calculations.