Question

Ashkenazi Companies has the following stockholders' equity account;

common stock (350,000 shares at $3 par) 1,050,000
paid in capital in excess of pare 2,500,000
retained earnings 750,000
total stockholders' equity 4,300,000

Assuming that state laws define legal capital solely as the par value of common stock, how much of a per-share dividend can Ashkenazi pay?

Answer 1

Investors 1 and 2 together do not hold a majority of shares to change company management or always get their way; they would need additional shareholders' support.

Step-by-step explanation:

The subject of the question involves understanding how many shares an investor or a group of investors would need to control in order to influence the management decisions of The Darkroom Windowshade Company. To change the top management, a group of investors would need over 50% of the vote. Adding the shares of Investor 1 and Investor 2, they have 20,000 + 18,000 = 38,000 shares.

This number is less than a majority of the total 100,000 shares, meaning that even if they vote together, they don't have enough shares to guarantee they can control the company's management decisions without the support of additional investors.