Study the following case/situation and express your opinion.RAJ Compan

1.	Study the following case/situation and express your opinion.RAJ Company limited decides to pay Interim Dividend.(a). Is the Board justified to decide Interim Dividend of Rs. 5/per share even though profits to date are insufficient?(b). Can the Board declare it out of Free Reserves?(c). Can the Board declare it out of Capital?
Answer» (a) The interim dividend is paid out of profits between two annual general meetings. It cannot be paid out of any reserves. So it is not justified. (b) No Board cannot declare an Interim dividend out of free reserves. (c) No Board cannot declare out of capital.

Study the following case/situation and express your opinion.RAJ Company limited decides to pay Interim Dividend.(a). Is the Board justified to decide Interim Dividend of Rs. 5/per share even though profits to date are insufficient?(b). Can the Board declare it out of Free Reserves?(c). Can the Board declare it out of Capital?

Answer»

(a) The interim dividend is paid out of profits between two annual general meetings. It cannot be paid out of any reserves. So it is not justified.

(b) No Board cannot declare an Interim dividend out of free reserves.