Introduction - Cash Dividend, Stock Dividend & Right Share
Dividend, Bonus Share and Rights Share
There is a dividend of return to promoters to encourage their colleagues from the profit earned by the company. This is a profit fraction that is provided to the shareholder. If such dividend is given on cash, the cash is a dividend, but if given a share as a profit, it is a bonus share or stock division. In order to capitalize the company's savings or backup fund, the existing shareholders are given additional shares (bonus shares) or increase the capital. Decision is decided by the quantity board of the dividend. Ordinary shareholders are the real owners of the company, so they are also entitled to dividends. However, the company should not have any binding status that any dividend should be given. If this is the only time giving profit, the company can also keep the amount in the backup fund, if the dividend is not paid.
Even then, the company is not always able to distribute dividend because it can be disappointed by the investors and can sell the shares of that company and go abroad. Therefore, the company will also give dividends and shares to protect the confidence and trust of the shareholder.
Right share
The other thing is that the company is also providing a right-to-share share to its shareholders only. Its main claimant is the same as Existing Shareholders. Because on their basis of the current share of shares, a percentage of shares is a disclosed stock. From which old shareholders are eligible to divide and the company benefits from it. Because the new shareholder is added, the company's official capital and liability will also increase. In such cases, if the company is unable to increase the size of the profit, it has a negative effect on all.
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