Complete the following exercise. Fill in the Excel spreadsheet provided via the

Question

Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to parts a, b, and c. Then paste the Excel data into a Word document on which you can also write the answer to part d. Label each exercise or problem clearly. Use APA formatting and citation if needed. Uzi Company received a charter granting the right to issue 200,000 shares of $1.00 par value common stock and 10,000 shares of 8% cumulative and nonparticipating, $50.00 par value preferred stock that is callable at $80.00 per share. Selected transactions are presented below. d. Provide a rationale between 200 and 300 words in length for buying or not buying this stock based on the financial information presented.

Explanation / Answer

Transactions details of Uzi Company:

Solution (d) : As per the financial Share structure details provided above of the Uzi Company, it is clear that the company has issued / encashed almost all of its common stock and had issued a part of Preferred stock at a higher price i.e. at premium.

The buying of the stock of Uzi Company is very much on the cards because of

1) Book value of common stock: The book value of the common stock is coming around $1.97 per share which is well above the par value of $1.

2) Directors holding : The member of the management of the company i.e the Director, has accepted the common shares towards his/her dues for services. So, it shows that the company has a long future and participating in the company's share is viable.

3) Preferred shares : The company has been able to issue its preferred stock at a premium of 50% of the par value, that shows the reputation of the company in the capital market. So, buying the company's preferred stock is also good as the same could be called back at $80 per share.

4) Earnings of the Company: After a small zitter in the first year of operation, the company has now turned in profit and have a positive net retained earnings of $44,000 at the end of second year. So, on earnings point also the participation in stock of the company is viable.

5) Dividend : The Company has declared the dividend in the second year of its operation, that shows the positive attitude of the management towards the Stock-holders and earnings. The company has declared a good 10% dividend to common stock. So, return to the share holders is also good and worthwhile to buy the stock.

6) Cash flow : The Company has paid the declared dividend to the stock-holders, that shows the company is also having positive cash flow. Thus, the growth of the company is seenable and buying the stock of the company is recommadable.

date Detail common stock Value of common shares preferred stock value of preferred shares Retained Earnings Feb 19 20x1 For cash 45000 $45000 or $1 per share Feb 22 20x1 to directors services 30000 $50000 or $1.67 per share Mar 30 20x1 to purchase assets 100,000 $250,000 or $2.50 per share Dec 31 20x1 Loss booked ($25000) Jan 12 20x2 issued preferred 1,000 $75000 or $75 per preferred share Dec 15 20x2 Declared dividend dividend declared @$0.10 dividend declared @8% Dec31 20x2 Profit booked $69,000 Jan 31 20x3 Paid dividend declared paid dividend paid dividend Summary of transactions 175,000 Average issued price @ $1.97 per share 1,000 @ $75 per share Can be callable at $80 per share net retained earning $44,000

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