Written Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6% preferred stock with a stated value of $5. The preferred stock is cumulative and participating. Dividends have been paid in every year except the past two years and the current year. Assuming that $270,000 will be distributed, how much will the common stockholders receive

the common stockholders receive $162,000

Explanation:

Preference Shareholders have preference interest over the dividends of Written Inc. This means the preference share holders will be paid their dividends before the common shareholders receive theirs

Note : The preferred stock is cumulative meaning that any dividends in arrears would have to be paid first before payment of dividends relating to current year dividends are declared and issued

Preference Dividends Arrears

Past Two years = (120,000 shares×$5×6%)×2

                          =$72,000

Current Year     = 120,000 shares×$5×6%

                          =$36,000

Total = $72,000+$36,000 = $108,000

Dividends Paid to Common stockholders

Total Distributed Dividend                               $270,000

Less Distributed to Preference shareholders($108,000)

Paid to Common stockholders                        $162,000

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

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