29 November 2013
How is dividend distributed to shareholders? Theoretically it is done from reserves kept from net profits but how is it practically done? As per my limited knowledge.. our actual profits aren't book profits but they are the cash profits but for the purpose of dividend distribution we calculate as per net profits... I am a little bit confused. Can any one enlighten me???
29 November 2013
Debajani, If you are talking about practical way to distribute dividend then you may be knowing that Shareholders are paid actual cash or cash equivalent for dividend... For paying dividend company needs assets like investments or cash bank balance by which it can pay the amount.. But there should be some limit and theory (calculation). Hence to calculate the amount we use net profit.. I think your are now able to differentiate between the actual cash profit and net profit..
CAclubindia
