Answer in brief.
1. State any four points to be kept in mind by a Listed Company with respect to Dividend.
Ans. Dividend refers to that portion of profit, which is distributed amongst the shareholders of the company. The points to be kept in mind by a Listed Company with respect to Dividend are as follows:
(1) It has to express the dividend on per share basis only. It must use electronic mode for payment of dividend such as Electronic Clearing Services (ECS) or National Electronic Fund Transfer (NEFT); as approved by the Reserve Bank of India (RBI).
(2) It has to notify stock exchange where company’s securities are listed at least 2 (two) days in advance of the date of meeting of the Board at which recommendation of final dividend is to be considered.
(3) It should intimate Stock Exchange immediately about declaration of dividend after the Board Meeting.
(4) It should give notice of Book closure to the stock exchange at least 7 (seven) working days before the closure.
(5) It should close the Register of members and the Transfer Register.
2. Discuss any four features of dividend.
Ans: Dividend refers to that portion of profit, which is distributed amongst the shareholders of the company. The Institute of Chartered Accountants of India has defined Dividend as, “a distribution to shareholders out of profits or reserves available for this purpose.”
Features of dividend are as follows:
(1) It is the portion of profits of the company paid to its shareholders.
(2) Dividend cannot be declared out of capital. It is payable out of the profits of the company.
(3) Dividend can be declared only on recommendation of the Board of Directors.
(4) Dividend as recommended by Board of Directors is approved and declared by a resolution passed at the Annual General Meeting by the shareholders.
(5) Dividend must be paid in cash and not in kind. Dividend is to be paid on paid-up value of shares and cannot be paid on calls paid in advance. (6) Dividend once approved and declared by shareholders creates a debt. It cannot be revoked.
3. Explain the features of Interest.
Ans. In simple meaning interest is a payment made by a borrower to the lender for the money borrowed and is expressed as a rate percent per year. It can be defined as “interest is the payment made by borrower for the use of a loan.”
Features of interest are as follows:
(1) Interest is the price paid for the productive services rendered by capital.
(2) It is directly related to risk. Higher the risk, higher is the interest.
(3) Rate of interest is expressed as annual percentage of Principal.
(4) Rate of interest is determined by various factors like money supply, fiscal policy, volume of borrowings, rate of inflation etc.
(5) It is payable at a fixed and generally pre determined rate.
(6) Interest is a charge against the profit of the company. Even if company makes no profit, interest should be paid.