Below is the common equity section (in millions)of Fethe Industries' last two year-end balance sheets: $$\begin{array} { l r r }
& 2015 & 2014 \
\text { Common stock } & \$ 2,000 & \$ 1,000 \
\text { Retained earnings } & 2,000 & 2,340 \
\text { Total common equity } &\underline{ \$ 4,000 }& \underline{\$ 3,340}
\end{array}$$ The company has never paid a dividend to its common stockholders.Which of the following statements is CORRECT?

Question

Below is the common equity section (in millions)of Fethe Industries' last two year-end balance sheets: $$\begin{array} { l r r } 
& 2015 & 2014 \
\text { Common stock } & \$ 2,000 & \$ 1,000 \
\text { Retained earnings } & 2,000 & 2,340 \
\text { Total common equity } &\underline{ \$ 4,000 }& \underline{\$ 3,340}
\end{array}$$ The company has never paid a dividend to its common stockholders.Which of the following statements is CORRECT?

Quizplus · Accepted Answer

The increase in common stock from \$1,000 million in 2014 to \$2,000 million in 2015 indicates that the company issued common stock in 2015. The information provided does not give any indication of the company's net income or the market price of its stock. The fact that the company has never paid a dividend to its common stockholders is not relevant to this question. The total common equity exceeding the company's debt is not stated and cannot be determined from the information provided.

Below Is the Common Equity Section (In Millions)of Fethe Industries