Hilton Corporation's income statement for the year ending December 31, 2009, appears below. Compute the maximum amount of dividends Hilton can pay if it has a debt covenant expressed as 20 percent of net income, and as 20 percent of net operating income. Which amount would a creditor more likely use as the restriction on dividends? Explain.

Question

Hilton Corporation's income statement for the year ending December 31, 2009, appears below.  Compute the maximum amount of dividends Hilton can pay if it has a debt covenant expressed as 20 percent of net income, and as 20 percent of net operating income. Which amount would a creditor more likely use as the restriction on dividends? Explain.

Quizplus · Accepted Answer

The Answer of Hilton Corporation's income statement for the year ending December 31, 2009, appears below.  Compute the maximum amount of dividends Hilton can pay if it has a debt covenant expressed as 20 percent of net income, and as 20 percent of net operating income. Which amount would a creditor more likely use as the restriction on dividends? Explain.

Hilton Corporation's Income Statement for the Year Ending December 31