I just seen to not understand what to do in the question. Can someone help me?:confused:

The year 2000 was not particularly pleasant year for the managers of Xeros Corp, or its shareholders. The company's stock price had already fallen in the previous year from 60 dollars per share to 30 dollars per share. Just when it seemed things couldn't get worse, Xerox's stock feel to 4 dollars per share. The data below were taken from the Dec. 31, 2000, statement of cash flows of Xerox. All Dollars are in millions.

Cash used in operating activities (663)
Cash used in investing activities (664)

Financing activities
Dividends paid (587)
Net cash received from issuing debt 3,498
Cash provided by financing activities 2,911

I have to answer these questions:

(a) If you were a creditor of Xerox, what reaction might you have to the above information?

(b) If you were an investor in Xerox, what reaction might you have to the above information?

(c) If you were evaluating the company as either a creditor or a stockholder, what other information would you be interested in seeing?

(d) Xerox decided to pay a cash dividend in 2000. This dividend was aprox. Equal to the amount paid in 1999. Discuss the issues that were probably considered in making this decision.

The answers don't have to be long, they just need to get to the point. I've been breaking my neck trying to figure out what to do. I really don't understand.

(a) If you were a creditor of Xerox, what reaction might you have to the above information?

I would be very upset as a creditor. They are having Cash Flow troubles and are paying a dividend! I would look into setting up restrictive convents with them if I could.


(b) If you were an investor in Xerox, what reaction might you have to the above information?

I would be happy I got a dividend. But at the same time, I would be worried this company might be going bankrupt. I have serious reservations of how this company is being run. While a dividend is nice, it should NOT have been equal to last year since our stock is worth half of what it was worth last year!

I would also be concerned that this business is not doing well anymore. Net Cash from Operating Activities should be a cash inflow, not outflow.


(c) If you were evaluating the company as either a creditor or a stockholder, what other information would you be interested in seeing?

- detailed Statement of Cash Flows
- Income Statement
- Balance Sheet
- Forecasts


(d) Xerox decided to pay a cash dividend in 2000. This dividend was aprox. equal to the amount paid in 1999. Discuss the issues that were probably considered in making this decision.

They figured they are going under and wanted the shareholder to get as much money as they could. (sarcasm)

I would question management's decisions and competence on this issue and in general on running the company.