On which capital is the dividend paid by a company to its shareholders?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- On Paid-up Capital.
Dividends are paid on Paid-up Capital. Dividends are distributed on the basis of actual investment made by shareholders, which is reflected in the paid-up capital.
Paid-up Capital: This represents the amount of capital that shareholders have actually paid to the company for their shares. It is the portion of subscribed capital which is paid by the shareholders on calling up by the company.
OTHER OPTIONS-
- Authorized Capital: This is the maximum amount of capital that a company is authorized to raise through the issue of shares during its lifetime.
- Issued Capital: This refers to the total number of shares that have been issued by the company, regardless of whether they have been subscribed or not by the public.
- Called-up Capital: This is the portion of the subscribed capital that the company has demanded from the shareholders to be paid.