Definition and Use of Dividend
A percentage of a business's income is distributed as dividends to shareholders as a way of thanking them for their contribution. Dividends are a means for businesses to distribute to their shareholders the profits they have made from their activities. We shall go into further detail on the definition, function, and operation of dividends in company in this post.
What a Dividend is
A company's operating profit is divided into dividends, which are paid to shareholders as a return on their investment. In addition to earnings from other businesses, this operating profit may come from the sale of goods or services. Dividends may be paid out as cash, stock, or a mix of the two.
Objective of Dividend
Dividends are primarily intended to distribute to shareholders the profits generated by the business's operations. The corporation can improve shareholder satisfaction and raise awareness of the success of the business's operations by issuing dividends. Furthermore, dividends can be a mechanism for increasing a company's liquidity---that is, its capacity to meet its financial obligations.
How Dividend Works
Dividends operate in the following ways:
Calculating Operating Profit: The business uses an accounting procedure to determine its operating profit.
Dividend Calculation: The amount of operating profit that will be distributed as dividends to shareholders is determined by the company.
Dividend Distribution: The business distributes dividends to its owners in the form of money, stock, or a mix of the two.
Use of Dividends: Dividend payments may be made by shareholders to expand their stake in other businesses or to buy more goods or services.
In summary, percentage of a business's income is distributed as dividends to shareholders as a thank you for their investment. Dividends are paid out to shareholders in order to boost the company's liquidity and to distribute the earnings made from its activities to them. Operating profit must be calculated in order to calculate dividends, which must then be used, distributed, and utilized. Companies can raise shareholder knowledge of their successful operations and enhance shareholder satisfaction by improving their comprehension of dividends.
to fulfill dr. Darmawan financial management course assignments.
Follow Instagram @kompasianacom juga Tiktok @kompasiana biar nggak ketinggalan event seru komunitas dan tips dapat cuan dari Kompasiana
Baca juga cerita inspiratif langsung dari smartphone kamu dengan bergabung di WhatsApp Channel Kompasiana di SINI
