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    2) Short Notes: A) Forms of Dividend

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    Tarunvir Kukreja
    The document discusses various forms of dividend payouts that companies can use, including: 1) Cash dividend - money deposited directly into shareholder accounts. 2) Stock dividend - additional shares issued to shareholders without consideration. 3) Property dividend - distribution of non-monetary assets to shareholders. 4) Scrip dividend - promissory notes issued to shareholders to pay dividend at a later date. 5) Liquidating dividend - return of original capital to shareholders when winding down a business.

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    2) Short Notes: A) Forms of Dividend

    Uploaded by

    Tarunvir Kukreja
    53 views2 pages
    The document discusses various forms of dividend payouts that companies can use, including: 1) Cash dividend - money deposited directly into shareholder accounts. 2) Stock dividend - additional shares issued to shareholders without consideration. 3) Property dividend - distribution of non-monetary assets to shareholders. 4) Scrip dividend - promissory notes issued to shareholders to pay dividend at a later date. 5) Liquidating dividend - return of original capital to shareholders when winding down a business.

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    The document discusses various forms of dividend payouts that companies can use, including: 1) Cash dividend - money deposited directly into shareholder accounts. 2) Stock dividend - additional shares issued to shareholders without consideration. 3) Property dividend - distribution of non-monetary assets to shareholders. 4) Scrip dividend - promissory notes issued to shareholders to pay dividend at a later date. 5) Liquidating dividend - return of original capital to shareholders when winding down a business.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    53 views2 pages

    2) Short Notes: A) Forms of Dividend

    Uploaded by

    Tarunvir Kukreja
    The document discusses various forms of dividend payouts that companies can use, including: 1) Cash dividend - money deposited directly into shareholder accounts. 2) Stock dividend - additional shares issued to shareholders without consideration. 3) Property dividend - distribution of non-monetary assets to shareholders. 4) Scrip dividend - promissory notes issued to shareholders to pay dividend at a later date. 5) Liquidating dividend - return of original capital to shareholders when winding down a business.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    2) Short notes

    a) Forms of dividend

     Cash Dividend: Cash dividend is the most popular form of dividend payout. In this,
    company issues the dividend to all shareholders where the money is deposited in the
    bank accounts of shareholders as per the holdings of the investors. Usually there is a
    predefined process for the dividend declaration.
     Stock dividend: If any company issues additional shares to common shareholders
    without any consideration then the action becomes stock dividend. If the company
    issues less than 25% of the previously issued stocks then it will be treated as the stock
    dividend. If the issuance of new shares is more than 25% of the last issue shares then
    it is treated as the stocksplit.
      Property dividend: Any company can issue any non-monetary dividend to its
    shareholders. The issued property dividend would be recorded against the current
    market price of the asset distributed. As the market price of the asset is expected to be
    either above or below the book value therefore it would either incur profit or loss and
    accordingly would be entered in the books. This interpretation of the distributed asset
    may force businesses to intentionally issue the property dividend to manipulate the
    taxable income.
     Scrip dividend: When any company doesnt have enough funds to pay dividend then
    it may choose to pay dividend in the form of promissory note to pay the shareholders
    at a later date. This essentially creates a note payable.
     Liquidating dividend: When the board of the company thinks of returning the
    original capital invested by the shareholders then it is known as the liquidating
    dividend. This may happen due to the fact the company intends to wrap up the
    business.

    b) Bonus issue

     A bonus issue of shares is stock issued by a company in lieu of cash dividends.


    Shareholders can sell the shares to meet their liquidity needs.
     Bonus shares increase a company's share capital but not its net assets.
    c) Stock split

     A stock split is a corporate action in which a company increases the number of its
    outstanding shares by issuing more shares to current shareholders.
     The primary motive of a stock split is to make shares seem more affordable to small
    investors.
     Although the number of outstanding shares increases and the price per share
    decreases, the market capitalization (and the value of the company) does not change.

    d) Buy back of shares

     A buyback occurs when the issuing company pays shareholders the market value per


    share and re-absorbs that portion of its ownership that was previously distributed
    among public and private investors.

     With stock buybacks, aka share buybacks, the company can purchase the stock on the


    open market or from its shareholders directly. In recent decades, share buybacks have
    overtaken dividends as a preferred way to return cash to shareholders. 

     Though smaller companies may choose to exercise buybacks, blue-chip companies


    are much more likely to do so because of the cost involved.

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