Dividends: how a company pays its owners
A dividend is a share of profit paid for each share held. Work one out, record it, and see what limits it.
Task 1What a dividend is3 questions
A dividend is a payment a company makes to its shareholders out of its profits. It is stated as an amount for each share.
In the year, Kestrel paid a dividend of 30p a share on its 20,000 shares. Priya holds 12,000 of them and Tom holds the rest.
A dividend is not an expense. It is a share-out of profit that has already been worked out, so it is taken from retained earnings and never appears in the statement of profit or loss.
Task 2Recording a dividend3 questions
Task 3Can the company afford it?3 questions