When it involves financing, there are some terms that are confusing but are much to be understood. Similarly, there are two words, dividends, and dividend policy. this text will facilitate you to grasp the dividend policy.

A company’s dividend policy determines the number of dividends a corporation pays to shareholders and the way often the dividends are paid. When an organization makes a profit, it’s to create a choice about what to try and do with it. you’ll be able to keep the company’s profits (the profits from the balance sheet) or distribute the money to shareholders within the style of dividends.

There are various styles of dividends. the primary one on the list is

Cash dividend – Dividends paid in cash to cut back the company’s cash reserves.

Bonus shares – Bonus shares

Bonus shares seek advice from shares within the company that’s distributed to shareholders at no cost. it’s usually drained in addition to a cash dividend, not in situ of it.

An example of a dividend policy is that a dividend policy employed by a corporation can affect the worth of the enterprise.  While the shareholders are the owners of the corporation, it’s the board of directors who make the decision on whether profits are going to be distributed or retained. The administrators must take plenty of things into consideration when making this decision, such as the expansion prospects of the corporate and future projects.