Interpreting Financial Statements: Shareholders’ Equity
Vicorp Restaurants, Inc., headquartered in Denver, operates or franchises 408 midscale restaurants, primarily under the names Bakers Square and Village Inn. Its 1994 balance sheet included the following shareholders’ equity section (in thousands):
|
1994 |
1993 |
1992 |
|
|
Common stock: $0.05 par value, |
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|
20,000,000 shares authorized, |
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|
9,509,426, 9,911,536, and |
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10,189,066 issued |
$ 476 |
$ 496 |
$ 509 |
|
Additional paid in capital |
91,544 |
98,338 |
105,701 |
|
Retained earnings |
42,846 |
49,484 |
32,960 |
|
Treasury stock, at cost |
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(0,0, and 212,851 shares) |
0 |
0 |
(3,725) |
|
Total shareholders’ equity |
$134,866 |
$148,318 |
$135,445 |
Required
a. Explain each item in the shareholders’ equity section of Vicorp’s balance sheet.
b. Why is there such a large discrepancy between the amounts assigned to common stock versus the additional paid in capital?
c. Assuming zero dividends, did Vicorp have positive or negative net income in 1993? in 1994? Why?
d. How many shares of its own common stock did Vicorp purchase in 1992? At what price? Assume that Vicorp did not sell any additional shares in 1992.
e. Could Vicorp issue 10,000,000 shares of common stock to quickly raise additional funds? In which years?
f. Calculate the amount of dividends paid by Vicorp, if any, in 1993 and 1994. For this purpose, assume that Vicorp’s net income was $16,524,000 in 1993, and it had a net loss of $6,638,000 in 1994.