Introduction to Dividend - Dividend Decision, Accountancy and Financial management Video Lecture | Accountancy and Financial Management - B Com

in this session let's focus on basics of
dividend what is dividend dividend is
basically a portion of profit after tax
which is distributed to the owners of
the business so if you distribute a
portion of profit which is available
after tax to the owners it will be
called as dividend it means there can be
some portion of profit after tax which
is not given to the owners and that
would be retained in the business and it
will be called as retained earnings so
when you have profit after tax you
basically have two choices one is to
give it to them
I mean give it to the owners in the form
of the dividend and the other one is
retain within the business in the name
of retained earnings so wide event is
very important or why understanding
dividend is very important see dividend
is basically an important aspect of the
corporate financial policy of the
business because by declaring the
dividend or by not declaring the
dividend you are taking the major
corporate financial decision how if you
have the profits and if that profits are
going to be declared as a dividend then
to that extent you have to part with the
cash that is available in your business
and in the immediate future if you need
cash for meeting any expansion of your
business then in such case you have to
go for raising fresh funds from the
market and when you raise fresh funds
from the market it will not come free
number one it will have an issue cost
and it will also carry higher
expectation so the return expectation
will also be more so
by declaring the dividend you are now
taking an extra step or extra effort
that is you have to make fresh issue of
shares which is going to come with the
issue cost and it will also have
additional written expectation so in the
place if you had not declared the
dividend this cash would have been
a label for meeting your expansion or
meeting your other requirements so here
you have to take a decision whether you
should declare dividend or you should
not declare dividend or whether you
should fund your future project with the
cash which is otherwise available or you
should go for fresh funds so everything
is linked to dividends here that's why
the dividend decision is considered as
one of the major decision which a CFO
has to take CFO has to take basically
three major decisions like how the
capital budgeting is going to be done
that is for capital expenditures then he
should take major decision for capital
structuring and the other major decision
which he takes this dividend decision
whether to declare the dividend or not
to declare the dividend and if you want
to declare the dividend then how much
you should declare how much you should
retain and so on so that's about the
dividend let me give you certain basic
terms associated with a dividend we know
that different is nothing but the
portion of the profit after tax which
are paid to the owners of the business
but what we have to understand is that
dividend can be paid in quarterly
intervals they can also be paid in
huffily intervals it can also be paid
and Willy when you pay the dividends in
quarterly or huffily intervals it will
be called as interim dividend when you
pay them on quarterly or huffily
intervals it will be called as interim
dividend and dividend is expressed as a
percentage of face value it is expressed
as a percentage of face value of the
shares in that case we call it as a
dividend rate that percentage will be
called as dividend rate we can also
express the dividend as a percentage of
market value of the share in such case
it will be called as a dividend yield
that percentage of market value will be
called as dividend yield and dividend is
basically paid out of the earnings which
is profit after tax right it is paid on
the earnings this earnings is nothing
but profit after tax so the portion of
dividend or the proportion of the profit
after tax which is used
or paying dividend that proportion of
that percentage will be called as payout
ratio right that proportion will be
called as payout ratio so this wrong
certain basic terms will go deeper in
subsequent sessions