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NPP

3.2

DIVIDEND POLICIES / {S>{dS>|S> nm°{bgrO

Q.25. Explain the meaning of the term "dividend policy" and different types of dividend.
''{S>{dS>|S> nm°{bgr'' eãX H$m AW© VWm {S>{dS>|S> Ho$ {d{^ÝZ àH$ma g‘PmB¶o&

Introduction n[aM`
Normally the aim of a business gm_mÝ`V:, EH$ {~OZog Am°J}ZmBOoeZ H$m CÔoí`
organization is to earn profits. The utilization àm°{\$Q> àmßV H$aZm hmoVm h¡¡Ÿ& àmßV àm°{’$Q²>g H$m Cn`moJ
of profits is a significant financial decision. The EH$ _hÎdnyU© \$m`Z|{e`b {S>grOZ h¡Ÿ& _w»` g_ñ`m `h
main issue is whether the profits should be
used by the owners or be re-invested in the h¡ {H$ BZ àm°{\$Q²>g H$mo Am°Zg© Ûmam Cn`moJ {H$`m OmZm
business itself. This decision does not involve Mm{hE `m {~OZog _| nwZ: BÝdoñQ> H$a {X`m OmZm Mm{hEŸ&
any problem so far as the sole proprietary EH$mH$s {~OZog _| `h {ZU©` coZo _| H$moB© g_ñ`m Zht
business is concerned. In case of partnership hmoVrŸ& nmQ>©Za{en H$s pñW{V _|, àm°{\$Q>²g H$mo nmQ>©Zg©
also, there is an agreement for the distribution _| {dV[aV H$aZo Ho$ {cE EH$ EJ«r_|Q> hmoVm h¡Ÿ& Om°BÝQ>
of profits among partners. The decision is
somewhat complex in case of joint stock ñQ>m°H$ H$ån{Z`m| Ho$ Ho$g _| `h {ZU©` Hw$N> hX VH$ O{Q>c
companies. hmoVm h¡Ÿ&
Since company is an artificial person, the My±{H$ H$ånZr EH$ H¥${Ì_ ì`{º$ h¡, Bg{cE àm°{\$Q> Ho$
decision regarding utilization of profits rests Cn`moJ go g§~§{YV {ZU©` ~moS>© Am°\$ S>m`aoŠQ>g© Ûmam {c`m
with board of directors. The decision regarding OmVm h¡Ÿ& eo`a hmoëS>g© Ho$ _Ü` Am` H$m {S>ñQ´>rã`yeZ EH$
distribution of earnings to the shareholders is
_hËdnyU© {ZU©` h¡Ÿ& {ZU©` H$m AW© g^r eo`ahmoëS>g© Ho$
a significant one. The decision may mean a
higher income, lower income or no income at {cE CÀMV_ Am`, Ý`yZV_ Am` `m H$moB© Am` Zht hmo
all to the shareholders. Besides affecting the gH$Vm h¡Ÿ& dV©_mZ eo`a hmoëS>g© H$s _ZmoXem H$mo à^m{dV
mood of the present shareholders, dividend H$aZo Ho$ Acmdm, {S>{dS>oÝS>, H$ånZr H$s dW© Ho$ gmW BgHo$
may also influence the mood, behaviour and g§~§Y Ho$ H$maU àm°ñnopŠQ>d BZdoñQ>g©, ñQ>m°H$ EŠgM|O Ed§
responses of prospective investors, stock \$mBZopÝe`c B§ñQ>rQ²>`yeÝg H$s _ZmoXem, ì`dhma Ed§ à{V{H«$`m
exchanges and financial institutions because
H$mo ^r à^m{dV H$aVm h¡ {OgHo$ n[aUm_ñdê$n BgHo$ eo`a
of their relationship with the worth of the
company which in turn affects the market H$s _mH}$Q> d¡ë`y à^m{dV hmoJrŸ& {S>{dS>oÝS> go gå~pÝYV
value of its shares. The decision regarding {ZU©` ~moS>© Am°\$ S>m`aoŠQ>g© Ûmam {cE OmVo h¢ {Ogo H$ånZr
dividend is taken by the Board of Directors and H$s EÝ`yAc OZac _rqQ>J _| BZH$s Am¡nMm[aH$ ê$n go
is then recommended to the shareholders for
ñdrH¥${V Ho$ {cE eo`ahmoëS>g© Ûmam AZwe§{gV {H$`m OmVm
their formal approval in the annual general h¡Ÿ& {S>{dS>oÝS> Ho$ ê$n _| cm^m| H$m {dVaU {d[^Þ nmQ>uO
meeting of the company. Disposal of profits in
the form of dividends can become a con- O¡go S>m`aoŠQ>g©, Båßcm°BO, eo`ahmoëS>g©, {S>~oÝMa hmoëS>g©,
troversial issue because of conflicting interests crqS>J B§ñQ>rQ²>`yeÝg Am{X Ho$ nañna-{damoYr {hV Ho$ H$maU
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