Dividends payable
Dividends payable refers to the profit distribution that a company is obligated to pay to its shareholders. When a company makes a profit, it returns the profit to the shareholders in the form of dividends based on their proportion of share ownership.
Definition: Dividends payable refer to the profit distribution that a company owes to its shareholders. When a company makes a profit, it returns the profit to shareholders in the form of dividends based on the proportion of shares they hold. Dividends payable are usually listed as short-term liabilities on the company's balance sheet because they are typically paid within a year.
Origin: The concept of dividends payable originates from corporate law and accounting standards. As early as the 19th century, with the rise of joint-stock companies, companies began to distribute profits to shareholders through dividends. Modern accounting standards further regulate the recognition and measurement of dividends payable.
Categories and Characteristics: Dividends payable can be divided into cash dividends and stock dividends.
- Cash Dividends: Dividends paid to shareholders in cash. This method directly increases shareholders' cash flow but reduces the company's cash reserves.
- Stock Dividends: Dividends paid to shareholders in the form of additional shares. The number of shares held by shareholders increases, but the company's cash flow is unaffected.
Specific Cases:
- Case 1: A company made a net profit of 10 million yuan in 2023 and decided to pay 20% cash dividends to shareholders. Assuming the company has 10 million outstanding shares, the dividend per share is 0.2 yuan, and the total dividends payable are 2 million yuan.
- Case 2: A company made a net profit of 5 million yuan in 2023 and decided to pay 10% stock dividends to shareholders. Assuming the company has 5 million outstanding shares, the dividend per share is 0.1 shares, and the total dividends payable are 500,000 shares.
Common Questions:
- Do dividends payable affect a company's financial status? Yes, cash dividends reduce the company's cash reserves, while stock dividends dilute earnings per share.
- When are dividends payable paid? Dividends payable are usually paid within a few months after being approved by the shareholders' meeting, with the specific time determined by the company.
