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6. Refer to the Consolidated Balance Sheet and C...




6. Refer to the Consolidated Balance Sheet and Consolidated Statement of Cash Flows for 2011. Note that no shares of preferred stock have been issued. a. Suppose that during 2011, Board of Directors decided to issue preferred stock (100 million shares of $100 par, $7 preferred stock) in 2012 to raise additional capital (assume they sell at par and all shares are bought). What impact would this have on the 2012 Statement of Cash Flows? b. Given the company?s debt position, would this be a sound business decision for managers? Requirement 6: For questions in part (a), calculate the amount of the preferred stock dividend; how would this impact Cash Flows Provided (Used) by Operating, Investing, and/or Financing activities? For question (b), compute the company?s liquidity using the Quick Ratio as of the end of 2011, both with and without the sale of preferred stock (assume they pay the annual dividend in February 2012). Given this ratio, would issuing the preferred stock be a good decision?


Paper#5174 | Written in 18-Jul-2015

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