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MEC Corporation has 100,000 shares of stock outstanding. Below is part of Mac's Statement of Financial Position for the last fiscal year.
What is the maximum amount MEC 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: C
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34 comments · newest first
MA
Matthew
11 months ago
$3.80? That sounds way too high!
AL
Alease
11 months ago
Wait, can they really pay that much and keep a 2:1 ratio?
KA
Katie
12 months ago
$2.50 seems reasonable to me!
CA
Carman
12 months ago
I think the current ratio is crucial here.
WE
Weldon
12 months ago
MEC has 100,000 shares outstanding.
WI
Willard
1 year ago
I think I recall that we need to ensure cash after dividends still meets the current ratio requirement. I just can't remember the exact numbers we used in practice.
LI
Lisandra
1 year ago
I feel like I might be overthinking this. If the current ratio needs to be 2 to 1, does that mean we can only pay dividends if cash is double the current liabilities?
CH
Christene
1 year ago
This question seems similar to one we practiced about dividend payouts and liquidity. I think we need to focus on the cash balance and current liabilities.
ER
Ernestine
1 year ago
I remember we discussed current ratios in class, but I'm not entirely sure how to calculate the maximum dividends while maintaining that ratio.
CH
Chanel
1 year ago
This question seems straightforward. I'm pretty confident I can identify the incorrect statement about Hive and other Hadoop components.
CA
Catina
1 year ago
I'm not sure about AutoCreate Purchase Orders - does that really use the employee record?
EL
Elin
1 year ago
I know the answer is C) $3.35, but I can't help but wonder if MEC's CEO is secretly hoping for option D) $3.80. You know, just to treat themselves to a little extra vacation time. Hey, a guy's gotta live a little, right?
SH
Sharan
1 year ago
Ah, the classic current ratio question. I'm confident that C) $3.35 is the right answer here. It's always important to maintain a healthy current ratio, even if it means sacrificing a few bucks in dividends. After all, you can't buy a Lamborghini with a bad current ratio, right?
PA
Paulina
1 year ago
So, C) $3.35 it is then. Thanks for the clarification!
BE
Ben
1 year ago
No, I don't think so. The current ratio needs to be maintained at 2 to 1.
RO
Rozella
1 year ago
But what about B) $2.50? Could that also be a possible answer?
RE
Rebecka
1 year ago
I think you're right, C) $3.35 seems like the correct choice.
JE
Jerry
1 year ago
Hmm, this is a tricky one. I'm torn between B) $2.50 and C) $3.35. I'll have to double-check my calculations, but I think C) is the correct answer. Gotta love these financial accounting questions, they really keep you on your toes!
ST
Steffanie
1 year ago
I'm leaning towards C) $3.35, but I'll double-check my calculations.
MA
Mattie
1 year ago
I agree, I also calculated it to be B) $2.50.
TA
Taryn
1 year ago
I think B) $2.50 is the correct answer.
CO
Cordie
1 year ago
I'm leaning towards option D) $3.80. That seems a bit high, but the question specifically says 'maximum amount' that MEC can pay, so I'm going with the higher option. I hope I'm not missing something crucial here.
MA
Marisha
1 year ago
User3: But the question does say it's the maximum amount MEC can pay.
ST
Stephanie
1 year ago
User2: I agree, it does seem high.
EN
Ena
1 year ago
User1: I think option D) $3.80 is too high.
LU
Luann
1 year ago
But if we calculate based on the current ratio, it seems like D) $3.80 could be the correct answer.
SH
Sharee
2 years ago
Based on the information provided, I believe the answer is C) $3.35. This is the maximum amount that MEC can pay in cash dividends per share and maintain a minimum current ratio of 2 to 1. The key is to keep the current ratio at 2 to 1, which means the current assets should be twice the current liabilities.
LA
Lawana
1 year ago
That makes sense. So, C) $3.35 is the maximum amount MEC can pay in cash dividends per share.
LA
Lashawn
1 year ago
Because the current assets need to be twice the current liabilities to maintain a current ratio of 2 to 1.
SU
Suzi
1 year ago
But why do you think that?
BL
Blossom
1 year ago
I think the answer is C) $3.35.
KI
Kindra
1 year ago
So, the maximum amount MEC can pay in cash dividends per share is $3.35.
MA
Marg
2 years ago
I disagree, I believe the answer is C) $3.35.
LU
Luann
2 years ago
I think the answer is B) $2.50.