You are a member of the Board of Director's of the Trac Medical Research and you have been prese

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You are a member of the Board of Director's of the Trac...

You are a member of the Board of Director's of the Trac Medical Research and you have been presented with the firm's audited financial statements as follows: Cash Accounts Receivable Inventories Net Fixed Assets Total Assets Trac Medical Research Inc. Balance Sheet as at March 1, 2017 ($ 000's) 1,000 Accounts payable Accruals Long-term debt 550 2,000 14,500 $18,050 Total Claims Common stock (1 million outstanding) Retained earnings 575 250 6,000 10,000 1,225 $18,050 Trac Medical Research Inc. Income Statement for the year ended ($ 000's) March 1, 2017 Sales Cost of Goods Sold Gross Margin Selling and Administrative Expenses Earnings Before Interest and Taxes Interest Expense Earnings Before Taxes Taxes Net Profit March 1, 2016 $12,000 $30,000 10,800 26,100 $1,200 $3,900 1,000 1,000 200 2,900 270 270 -70 2,630 921 1,710

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There is a motion at today's meeting (March 17, 2017) of the Board of Directors to pay $1,000,000 in cash dividends to the common shareholders as of the date of record (April 4, 2017), just like the firm has paid dividends each year for the past five years. You have questioned management and the auditors about the financial performance of the company over the past year. Management has assured you that the poor financial results were due to one-time cost overruns and that the firm should return to normal profitability next year. Management has assured you that the firm has not signed any debt covenants that would limit the firm's ability to pay dividends. a) Discuss fully the legal rules constraining the payment of cash dividends and their application, if any, in this case. Further, discuss arguments in favor of the payment of cash dividends. b) How will you vote on this motion? Fully discuss your assessment of the firm's financial condition and explain your reasoning for your position regarding the vote. You are a member of the Board of Directors of Trac Medical Research and you have been presented with the firm's audited financial statements as follows: Trac Medical Research Inc Balance Sheet as at March 1, 2017 ($000's) Cash Accounts Receivable Inventories Net Fixed Assets Total Assets 1,000 Accounts payable 550 Accruals 2,000 Long-term debt 14,500 Common stock (1 million outstanding) $18,050 Retained earnings Total Claims 575 250 6,000 10,000 1,225 $18,050 Trac Medical Research Inc. Income Statement for the year ended .... ($000's) March 1, 2017 Sales $12,000 Cost of Goods Sold 10,800 Gross Margin $1,200 Selling and Administrative Expenses 1,000 Earnings Before Interest and Taxes 200 Interest Expense 270 Earnings Before Taxes -70 Taxes Net Profit March 1, 2016 $30,000 26,100 $3,900 1,000 2,900 270 2,630 921 1,710

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