Types of dividends: Distressed Capital, Inc., is being liquidated. The company's assets can be sold for $20 million. It will cost $18 million for the company to meet all its previous obligations and to payoff debt holders. The company has 30 million shares outstanding. If you own 2,000 shares, how much do you expect to receive in liquidating dividends? Ignore taxes.

Question

Quizplus · Accepted Answer

The liquidating dividend is the amount of money that each shareholder receives when a company is liquidated. The liquidating dividend is calculated by dividing the amount of money that the company has available for distribution to shareholders by the number of shares outstanding. In this case, the company has $20 million available for distribution to shareholders and there are 30 million shares outstanding. Therefore, the liquidating dividend is $20 million / 30 million shares = $0.6667 per share. If you own 2,000 shares, you will receive $0.6667 per share x 2,000 shares = $133.33 in liquidating dividends.

Types of Dividends: Distressed Capital, Inc