Forms of dividend, Financial Management

FORMS OF DIVIDEND

Cash Dividend

Many Companies pay dividend in cash. Often cash dividend may be supplemented by a bonus issue (stock dividend).  When the company chooses a stable dividend policy, it must be prepare a cash budget for the coming period to point out the essential funds, to meet regular dividend payments of the company. The cash account and the reserves account of a company will be reduced when the cash dividend is paid. Thus, both of the total assets and the net worth of the company are reduced when cash dividend is distributed. The market price of the share drops in most cases by the amount of cash dividend distributed.

Stock Dividend (Bonus Shares)

A stock dividend defines a distribution of shares in lieu of or as well as to the cash dividend to the existing shareholders. The announcement of stock dividend will raise the equity share capital and reduces the reserves and surplus (retained earnings) of the company. The declaration of stock dividend does not affect the total net worth or the wealth of shareholders. The EPS and market price per share will fall proportionately to the bonus issue.  But in proportion to earnings of shareholders will continue unchanged.

Stock splits

A stock split is a technique to increase the no. of outstanding shares via proportional reduction in the par value of the shares. With stock split, the total net worth does not modify and the no. of outstanding shares increases with dilutions in EPS and a proportionate fall in the market price of a share. This technique is usually used to lesser the market price of a firm's stock by increasing the number of shares belonging to every shareholder in the order to increase the trading of the shares.

Reverse split

Under the condition of falling price of a company's share, the company may want to decrease the number of outstanding shares to enhance the market price for each share. The reduction of the number of outstanding shares by increasing for each share per value is known as Reverse split.

Stock Re-purchase

It is the Repurchasing by the firm of outstanding shares of its common stock in the market place.

Posted Date: 10/16/2012 1:19:04 AM | Location : United States







Related Discussions:- Forms of dividend, Assignment Help, Ask Question on Forms of dividend, Get Answer, Expert's Help, Forms of dividend Discussions

Write discussion on Forms of dividend
Your posts are moderated
Related Questions
2.5. Västerås Corporation plans to buy a truck for $40,000 and depreciate it fully over 5 years using straight-line method of depreciation. However, it plans to use it for 8 years



Q. What is Installment Credit? This is another method by which the assets are purchased and the possession of goods is taken immediately but the payment is made in installments

a) Talk about in brief the various GAAPs that are mandatory to be followed. b) What are the several components of total cost.

The salem company bond currently sells for $955 has a 12% coupon interest rate and $ 1000 par value pays interest annually an

At 31 July 2010 this instrument meets the definition of a derivative: Small or no initial investment. Its value is dependent on an underlying economic item; exchange ra

Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations. The sole proprietor has infinite liability for mat

The face value of the debt security can be thought of as the principal amount on which interest is paid by the issuer. It is the amount the issuer is willing to r

Define intermediation . The monetary system makes it possible for deficit and surplus economic units to come together exchanging funds for securities to their mutual benefit.