Question

State, with reasons, whether the following statements are True or False. (Any Three) 

The rate of interim dividend is greater than final dividend. 

Answer 1

False:

Reasons: (1) Interim dividend is the dividend which is declared between two annual general meetings of a company. Final dividend is the dividend which is declared at the annual general meeting of the company.

(2) Interim dividend is declared when the company makes good profit in the first half of the financial year. I.e. declared before the end of the financial year. Final dividend is declared at the completion of financial year in Annual General Meeting of the company.

(3) Interim dividend is declared by the Board by passing a resolution if they are authorised by articles. Final dividend is recommended by the Board and declared by the shareholders by passing ordinary resolution (decision) at Annual General Meeting.

(4) The rate of interim dividend is less than final dividend. The rate of final dividend is generally more than interim dividend.

(5) Declaration of interim dividend becomes risky and illegal, if company incurs loss at the end of the year. Declaration of final dividend is always legal, as it is declared only after ascertaining (discover) the correct profit on the basis of the audited accounts.

(6) Interim dividend is treated as a part of final dividend. Therefore the rate of interim dividend is less than the final dividend.