Cash dividends are payments made by a corporation to its shareholders from its profits or retained earnings. They represent a distribution of corporate earnings and are typically paid in cash on a per-share basis.
5 Must Know Facts For Your Next Test
Cash dividends reduce the company's retained earnings and cash balance.
The declaration date is when the board of directors announces the dividend payment.
The record date determines which shareholders are entitled to receive the dividend.
On the payment date, the company distributes the dividend to eligible shareholders.
Dividends do not affect net income but decrease equity on the balance sheet.
Review Questions
What are cash dividends and how do they impact a corporation's financial statements?
What is the significance of the declaration date, record date, and payment date in relation to cash dividends?
How do cash dividends affect retained earnings and cash balances?
Related terms
Property Dividends: Non-cash distributions made by a corporation to its shareholders in the form of assets other than cash.
Stock Dividends: Distributions of additional shares of stock to existing shareholders without any exchange of funds.
Stock Splits: An increase in the number of outstanding shares accompanied by a proportional decrease in the share price.