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what is dividends and how the company declares the dividend to the shareholder ???

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Jun 6 '19 at 10:23:42

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A dividend is a payment of a share of the profits of an entity to its shareholders. Dividends for a corporation are the equivalent of owners drawings for a non-incorporated business.

When a business makes a profit, it can either decide to retain those profits, in which case they are added to retained earnings forming part of the shareholders equity in the business, or it can pay part of the profits to the shareholders by way of a dividends.

for exampe there is no stock issued, a business does not have to pay a dividend, the decision depends on the board of directors, who have to decide based on the requirements of the business.

A business in the process of growing may need the cash to fund expansion, and might be better served by retaining the profits and using the internally generated cash rather than borrowing. The investors in the business understand that they might not receive dividends for a long period of time, but will have invested in the hope that the value of their shares will rise in the future.

In contrast, an established business might not need to retain profits and will distribute them as a dividend each year. The investors in such businesses are looking for a steady growth in the dividends.

erffrence :
Jun 6 '19 at 10:44:37
7 months ago
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