Monday, August 1, 2011

Finance and Management - 20

In the last blog, we learnt about par value. In today's blog, we move ahead to learn about "Dividends".

Simply put, Dividend is a distribution of cash to shareholders. The board of directors of a company recommends payment of the dividends and then this is approved by the shareholders at the annual general body meeting. A dividend declared by the board during the year is called Interim Dividend. Ordinarily, the dividend cannot exceed the total of the current and past profits of the company.

Dividends are generally expressed as percentage of the paid up share capital or so many rupees per share. Dividends are paid by means of dividend warrant, and this is a special cheque, it cannot be paid in kind.

What is important to note is that, it wouldn’t be right to consider any return on business in excess to the profits as a dividend; it is merely return of the capital invested. The company should note that when it pays dividends, the cash outgo doesn’t affect the normal operations, else it would be catastrophic.

Read in Kannada:

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