A dividend paid by a corporation is a distribution of profits to the owners of the corporation. The owners of a corporation are known as stockholders or shareholders. (In a sole proprietorship, the distribution of profits to the owner is referred to as a draw.)
A corporation’s board of directors, which is elected by the stockholders, decides if a cash dividend is needed. The considerations for paying or not paying a dividend include the stockholders’ wishes, the stock market’s reaction, and the corporation’s needs and opportunities for cash in the present and in the future.
Learn more about Stockholders’ Equity.
About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.
He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.
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