Many companies in recent years have bought back their common stock. For example, IBM, with large cash holdings, spent almost $35 billion over three years repurchasing its stock.18 What are the reasons companies buy back their own shares? What is the effect of common stock buybacks on earnings per share, return on equity, return on assets, debt to equity, and the current ratio?

Franklin Co. reported the following year-end data: net income of $220,000; annual cash dividends per share of$3; market price per (common) share of $150; and earnings per share of$10. Compute the (a) price-earnings ratio.

Complete the information requested below each map.

Choose the correct possessive construction for the following prepositional phrase. Ownership word is italicized.

Linkedin accounts of the five students

a. the five student's Linkedin accounts

b. the five students Linkedin accounts

c. the five students' Linkedin accounts

When Crocs, the shoe company, reported in early 2007 that its first-quarter earnings had increased from the previous year, its stock price jumped to over $80 per share. At the same time, the company announced a 2-for-1 stock split.19 What is a stock split and what effect does it have on the company’s stockholders’ equity? What effect will it likely have on the market value of the company’s stock? In light of your answers, do you think the stock split is positive for the company and for its stockholders?

The three principle levels within a business organization hierarchy are

A) senior management, operational management, and service workers.

B) senior management, middle management, and operational management.

C) senior management, operational management, and information systems.

D) senior management, middle management, and service workers.

Avaya Corporation had the following stock outstanding from 2011 through 2014:

Preferred stock: $100 par value, 8 percent cumulative, 5,000 shares authorized, issued, and outstanding

Common stock:$10 par value, 100,000 shares authorized, issued, and outstanding

The company paid $30,000,$30,000, $94,000, and$130,000 in dividends during 2011, 2012, 2013, and 2014, respectively. The market price per common share was $7.25 and$8.00 per share at the end of years 2013 and 2014, respectively.

Required

1. Determine the dividends per share and the total dividends paid to common stockholders and preferred stockholders in 2011, 2012, 2013, and 2014.

2. Perform the same computations, with the assumption that the preferred stock was noncumulative.

3. Calculate the 2013 and 2014 dividend yield for common stock, using the dividends per share computed in requirement 2. (Round to the nearest tenth of a percent.)

4. How are cumulative preferred stock and noncumulative preferred stock similar to long-term bonds? How do they differ from long-term bonds?

Identify 3 reasons why a firm might buy back its own common stock shares.

You read that for every gallon of gasoline burned by a car's engine, nearly 20 lb of carbon dioxide is produced. Is this correct? Explain.

Brazil is the largest coffee producer in the world, and coffee is one of Brazil's major export goods. Suppose that in 20 years, Brazil no longer produces much coffee and imports most of its coffee instead. Explain why Brazil might change its trade pattern over time.

Suppose there is a decrease in the price of swimsuits and no change in the market demand curve for swimsuits. Who receives the resulting increase in consumer surplus? a. Only buyers who purchased swimsuits at the original price. b. Only buyers who did not purchase swimsuits at the original price. c. Only sellers who sold swimsuits at the original price. d. Everyone who bought or sold swimsuits at the original price. e. Buyers who did, and who did not, purchase swimsuits at the original price.

The stockholders’ equity section of Villa Corporation’s balance sheet as of December 31, 2013, follows.

$$\begin{array}{lr} \text{Contributed capital:}\\ \text{$\quad$Common stock, \$4 par value, 500,000 shares authorized, 200,000}\\ \text{$\quad\quad$shares issued and outstanding} & \$\hspace{8pt}800,000\\ \text{$\quad$Additional paid-in capital} & \underline{1,000,000}\\ \text{Total contributed capital} & \$1,800,000\\ \text{Retained earnings} & \underline{1,200,000}\\ \text{Total stockholders’ equity} & \underline{\underline{\$3,000,000}}\\ \end{array}$$

Villa had the following transactions in 2014:

Feb. 28 - The board of directors declared a 10 percent stock dividend to stockholders of record on March 25 to be distributed on April 5. The market value on this date is $16.

Mar. 25 - Date of record for stock dividend.

Apr. 5 - Issued stock dividend.

Aug. 3 - Declared a 2-for-1 stock split.

Nov. 20 - Purchased 18,000 shares of the company’s common stock at$8 per share for the treasury.

Dec. 31 - Declared a 5 percent stock dividend to stockholders of record on January 25 to be distributed on February 5. The market value per share was $9.

Required

1. Record the stockholders’ equity components of these transactions using T-accounts.

2. Prepare the stockholders’ equity section of Villa’s balance sheet as of December 31, 2014. Assume net income for 2014 is$108,000.

3. If you owned 1,000 shares of Villa stock on February 1, 2014, how many shares would you own on February 5, 2015? Would your proportionate share of the ownership of the company be different on the latter date from what it was on the former date? Explain your answer.

Rutherford Corporation has 20,000 shares of its $100 par value, 7 percent cumulative preferred stock outstanding and 100,000 shares of its$1 par value common stock outstanding. In Rutherford’s first four years of operation, its board of directors paid the following cash dividends: 2011, none; 2012, $240,000; 2013,$280,000; 2014, $280,000. Determine the dividends per share and total cash dividends paid to the preferred and common stockholders during each of the four years.

Why does a company usually not want to issue all its authorized shares?