Distinguish between Final dividend and Interim dividend.
|1||Meaning||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.|
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||Who declares?||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||Rate of Dividend||The rate of interim dividend is less than final dividend.||The rate of final dividend is generally more than interim dividend.|
|5||Legal Aspects||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||Authorisation of Articles||
Authorisation of Articles is necessary for declaration of interim dividend.
|Authorisation (approval) of Articles is not necessary for the declaration of final dividend.|
|7||Sources for declaration||An interim dividend is declared on the basis of the better financial prospective results may it to be quarterly, half yearly etc.||There are 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 Government for dividend.|