Question

Boeing is a corporation with stock traded on the New York Stock Exchange. On average, about 3.2 million shares of Boeing change hands each day as stockholders buy and sell share of stock. The price of the stock at the close of business on October 17, 2018, was $365.50 per share and there are about 574 million shares outstanding. Boeing has $92.3 billion in assets and about $91.9 billion in debt and in its most recent fiscal year, it earned about $8.2 billion in net income. Which of the following is correct? MARK ALL THAT APPLY.  

A. The company could decide to send some of the net income that was earned to the stockholders in the form of dividends.
B. If Boeing were to decide to go out of business and sell all of its assets and use the proceeds to pay down all of its debt, the stockholders would get what remains (if anything).
C. The stockholders each directly own a pro rata share of the company’s assets.
D. Each stockholder will receive a check for their share of the $8.2 billion in net income.

Answer 1

(A), (B) and (C) are correct.

The company could distribute net income as dividends. The stockholders are entitled to whatever remains if assets are sold and debt is paid off. Each share represents a small, pro-rata fraction of the company.

(D) is incorrect. This will happen only if the entire net income is distributed as dividends. The company is not mandated to distribute each year's net income as dividends. Whether dividend is to be paid, and the amount of dividend, are at the discretion of the board