Dividends are one off or periodic gains that are received by shareholders of a company. They are a great way of guaranteeing yourself a regular income stream particularly if you have invested in a profit-making company. Shareholders may receive a share of the profit either monthly, every six months or annually. Most companies award their bonuses once every year. There many different types of dividend payments that exist in the city of Florida.
The most commonly issued form of bonus is cash bonus. As the name suggest, this comes in the form of cash. Each shareholder gets a proportion of the profit depending on the number of shares that they have in the company. The first step in paying the bonus is a resolution by the board of directors on what is referred to as the date of declaration. Next is the date of record on which the amount is allocated to individual shareholders. Disbursement occurs on the date of payment.
Cash bonus has a major advantage in that it allows the shareholders to enjoy the economic value of their company in the form of cash. The main disadvantage associated with this is the fact that issuing the bonus usually affects the share price. As a matter of fact the proportion of price reduction corresponds to the amount of bonus that is paid out. A bonus of 5%, for instance causes a reduction in price of about 5%.
A stock bonus is another type that a company may consider issuing to shareholders. As the name suggest, this form of bonus is issued in the form of extra shares for every one held. For instance, the board may pass a resolution that shareholders are to receive one share for every two held. This means that an investor with 100 shares for instance gets an extra 50.
A property bonus is a non-monetary bonus issued by a company to its shareholders. This bonus is captured in the records using the fair market value of assets that have been distributed. The market value may vary from the book value of the same property result into a profit or loss transaction. It is for this reason that some businesses opt for this kind of bonus so as to reduce their taxable income.
A scrip bonus is issued in some special circumstances. The bonus is usually recommended by a company that has no plans of issuing cash bonus in the near future. In a sense, this type of dividend resembles a promissory note issued by the company to the shareholders. The pay-out is usually made when the company becomes profitable enough. There may or may not be incorporation of an interest rate.
A Liquidating bonus is a rather rare type of pay-out. This bonus is issued to shareholders who contributed the initial capital. It is so called because it is usually issued when a company is winding up. The accounting processes involved are similar to those of cash bonus. The only difference is that the source of the money is a new paid-in capital account.
Companies have many options when it comes to the payment of dividend. The type that is chosen is determined by factors such as the amount of profit in a financial year and shareholder resolutions during annual general meetings. Paying dividend regularly has the advantage of attracting more investors into the company. It has the downside of reducing the amount of capital available for expansion.
The most commonly issued form of bonus is cash bonus. As the name suggest, this comes in the form of cash. Each shareholder gets a proportion of the profit depending on the number of shares that they have in the company. The first step in paying the bonus is a resolution by the board of directors on what is referred to as the date of declaration. Next is the date of record on which the amount is allocated to individual shareholders. Disbursement occurs on the date of payment.
Cash bonus has a major advantage in that it allows the shareholders to enjoy the economic value of their company in the form of cash. The main disadvantage associated with this is the fact that issuing the bonus usually affects the share price. As a matter of fact the proportion of price reduction corresponds to the amount of bonus that is paid out. A bonus of 5%, for instance causes a reduction in price of about 5%.
A stock bonus is another type that a company may consider issuing to shareholders. As the name suggest, this form of bonus is issued in the form of extra shares for every one held. For instance, the board may pass a resolution that shareholders are to receive one share for every two held. This means that an investor with 100 shares for instance gets an extra 50.
A property bonus is a non-monetary bonus issued by a company to its shareholders. This bonus is captured in the records using the fair market value of assets that have been distributed. The market value may vary from the book value of the same property result into a profit or loss transaction. It is for this reason that some businesses opt for this kind of bonus so as to reduce their taxable income.
A scrip bonus is issued in some special circumstances. The bonus is usually recommended by a company that has no plans of issuing cash bonus in the near future. In a sense, this type of dividend resembles a promissory note issued by the company to the shareholders. The pay-out is usually made when the company becomes profitable enough. There may or may not be incorporation of an interest rate.
A Liquidating bonus is a rather rare type of pay-out. This bonus is issued to shareholders who contributed the initial capital. It is so called because it is usually issued when a company is winding up. The accounting processes involved are similar to those of cash bonus. The only difference is that the source of the money is a new paid-in capital account.
Companies have many options when it comes to the payment of dividend. The type that is chosen is determined by factors such as the amount of profit in a financial year and shareholder resolutions during annual general meetings. Paying dividend regularly has the advantage of attracting more investors into the company. It has the downside of reducing the amount of capital available for expansion.
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