Sample Essay

The change in retained earnings for 2008 was $867 million while it was $564 million for 2007. The net income was also $867 million in 2008 and $564 million in 2007. The same amount of changes in retained earnings and net income is due to a zero dividend policy of the company. The company has not paid any dividends in the past years and does not intend to pay any dividends in the foreseeable future.


There were no dividends paid out in the past years as mentioned in the answer to the previous question so this question can be ruled out whether dividends were on common stock or preferred stock. There was no amount of dividends paid in common stock or preferred stock.


The retained earnings are affected by two elements which are net income and dividends. As the company has not paid any dividends in recent years the change in retained earnings is only due to change in net income during a year.


The balance sheet of the company indicates that the company has two classes of shares outstanding which are shares of common stock and preferred stock.


The number of authorized shares is 5 million shares for preferred stock and 450 million shares of common stock. The number of issued and outstanding out of these authorized shares is 225 million shares of common stock while no shares are issued or outstanding for preferred stock.

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