If you purchased 100 shares of Mattel, Inc., you
would own a small interest in the company.
Thus, you would own a small amount of the fu-
ture financial prospects of the company that
has already sold over 1 billion Barbie®dolls in
over 150 different countries. These shares might
increase or decrease in value, depending upon
the market’s perception of the future earnings
prospects of Barbie, American Girl®, Fisher
Price®toys, and other Mattel products. In ad-
dition, the number of shares outstanding might
impact the value of your shares. You would
want the financial statements to inform you of
any changes in your underlying ownership. For
example, new issues of common stock would
dilute your interest in the firm, while reduc-
tions in the outstanding stock would increase
your interest in the firm.
The shares might also pay a dividend,
which is a return of cash to the stockholders.
Mattel pays a dividend of $0.45 per share. Thus,
a holder of 100 shares would receive dividend
payments equal to $45.00 per year. Would you
invest in a company that didn’t pay any divi-
dends? Many companies do not pay dividends,
yet they remain attractive investments. The rea-
son is that many companies have excellent in-
vestment opportunities for funds that might
otherwise be paid out as dividends. This is why
growth companies, such as GoogleandCisco
Systems, do not pay any dividends, while more
mature companies, such as Procter & Gamble,
The Coca-Cola Company, and Bank of
America, do pay dividends.
In this chapter, we will present accounting
for common stock and dividends. We will also
present some analysis tools for evaluating com-
mon stock and dividend policy.
Mattel, Inc.
© PR NEWSWIRE/MATTEL, INC. (AP WIDE WORLD PHOTO)