Company profit distribution – Reserve after paying declared dividends A company has issued 10,000 preferred shares and 50,000 common shares, both of par value $100 each. Dividends are 12% on each preferred share and 17.6% on each common share. The total profit is $15 million. After paying these dividends, how much is kept in the reserve fund?

Introduction / Context:We translate dividend percentages into absolute payouts using the number of shares and their par values. The remainder of the profit (after total dividends) is transferred to the reserve fund. This is a straightforward allocation question in corporate finance arithmetic.

Given Data / Assumptions:

• No. of preferred shares = 10,000; dividend = 12% on $100 par
• No. of common shares = 50,000; dividend = 17.6% on $100 par
• Total profit = $15,000,000

Concept / Approach:Preferred dividend = count * (rate * par). Common dividend = count * (rate * par). Total dividend = preferred + common. Reserve = total profit − total dividend.

Step-by-Step Solution:Preferred dividend = 10,000 * (0.12 * 100) = 10,000 * 12 = $120,000Common dividend = 50,000 * (0.176 * 100) = 50,000 * 17.6 = $880,000Total dividends = $120,000 + $880,000 = $1,000,000Reserve fund = $15,000,000 − $1,000,000 = $14,000,000

Verification / Alternative check:Per-share dividends: $12 (pref) and $17.6 (common). Multiplying by counts confirms the totals.

Why Other Options Are Wrong:$5M–$6.5M reserves would imply much larger dividend payouts; our exact calculation shows $14M remains.

Common Pitfalls:Applying percentages to market prices, or assuming the “Millions” scale changes per-share calculations.

Final Answer:$ 14 Million