Question

Distinguish between the following:

Interim dividend and Final dividend.

Answer 1

Points	Interim dividend	Final dividend
Meaning	The 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.
When declared?	The 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.	The final dividend is declared at the completion of the financial year in Annual General Meeting of the company.
Who declares?	The 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 an ordinary resolution (decision) at the Annual General Meeting.
Rate of Dividend	The rate of the interim dividend is less than the final dividend.	The rate of the final dividend is generally more than that of the interim dividend.
Legal Aspects	Declaration of an interim dividend becomes risky and illegal if the company incurs a loss at the end of the year.	Declaration of a final dividend is always legal, as it is declared only after ascertaining (discovering) the correct profit on the basis of the audited accounts.
Authorization of Articles	Authorisation of Articles is necessary for the declaration of an interim dividend.	Authorisation (approval) of Articles is not necessary for the declaration of final dividend.
Sources for declaration	An interim dividend is declared on the basis of the better financial prospective results, it be quarterly, half-yearly, etc.	There is a number of sources available for declaring the final dividend. It can be declared out of current profits or profits of the previous years or out of reserves or out of capital profits out of the financial assistance specifically provided by the Government for the dividend.