The Final and Proposed Dividend is essential to a companyโs financial year. While the Proposed Dividend is the expected or declared Dividend for a financial year, the final Dividend stands true to its name.
Key Takeaways
- A final Dividend is a dividend paid to the shareholders at the end of the financial year from the companyโs profits after all liabilities are paid.
- A proposed Dividend is a proposed distribution of profits to shareholders that the board of directors recommends but has yet to be approved by the shareholders.
- The final Dividend is paid to the shareholders after they approve it at the Annual General Meeting. In contrast, the Proposed Dividend is subject to the shareholdersโ approval.
Final Dividend vs Proposed Dividend
The proposed dividend gets proposed for the sanctioning of the final dividend. Simply put, the board of directors keeps the Proposed dividend forward for the required changes. After the changes, the board moves forward will the final call.
The final Dividend is what its name suggests. It shows the dividend part that is declared at the annual general meeting by the director board of a corporation. The final dividend is more significant in comparison to the interim dividend.
The proposed dividend is the expected part of a dividend at the end of the financial year. It is given to the shareholders during the current fiscal year but given in the following financial year.
Comparison Table
| Parameters of Comparison | Final Dividend | Proposed Dividend |
|---|---|---|
| Terminology | It shows the dividend part the director board declares at the annual general meeting. | The board of directors proposes the expected part of the dividend. |
| Liability | It is not considered a current liability. | Proposed dividend affects the working capital by a good margin in the decreasing year and is counted as a current liability. |
| Disbursed in | It is disbursed in the current year. | It is declared in the current year but given in the following year to the shareholders. |
| Mutual Relationship | It is the final result of the proposed dividend. | Proposed dividend refers to the final dividend at last. |
| Proposal and Declaration | At first, the final dividend is proposed by the board of directors and then declared by the shareholders. | It must be less than the recommendation of the board of directors. |
What is Final Dividend?
The final Dividend is disclosed to the shareholders during the meeting of the director board of a company. The payment for a final dividend is made in cash and not in stocks to the shareholders.
The final Dividend is what its name suggests. It shows the dividend part that is declared at the annual general meeting by the director board of a corporation. Apart from this, it differs from interim dividends by a lot.
It is used in Europe and the United States. Declared at the annual general meeting, it is called the successor of the proposed dividend. It can also be paid periodically(after every quarter).
When a companyโs earnings are known for a financial year, the board of directors releases the final dividend. Generally, it is determined by the director board of a company but claimed by the shareholders annually.
What is Proposed Dividend?
The proposed dividend is the expected part of a dividend at the end of the financial year. It is determined to the shareholders during the current fiscal year but given in the following financial year.
The proposed dividend wonโt be included in the balance sheet with the new amendments. It is counted as a current liability because it affects the working capital in decreasing order.
Proposed in the current financial year but paid in the next year, the proposed dividend is taxable when it is kept forward by the board of directors. There are many accounting software that helps people to create a sheet for the proposed dividend in a hassle-free manner.
All it asks for is the date and reference related to the transaction, with some other credentials. It can be downloaded for offline purposes and meetings or can be used through cloud-based software.
Main Differences Between Final Dividend and Proposed Dividend
- The final dividend is the annually declared dividend by the board of directors, whereas the proposed tip is the expected part of the dividend.
- The final dividend is not considered a current liability. But, the proposed dividend is counted as a current liability.
- The final dividend is disbursed in the current year. On the other hand, the proposed dividend is declared in the current year but given in the following year to the shareholders.
- The final dividend is the annual result of the proposed dividend, whereas the Proposed dividend refers to the final dividend at last.
- At first, the final dividend is proposed by the board of directors and then declared by the shareholders. The proposed dividend must be less than the board of directorsโ recommendation.
- https://heinonline.org/HOL/LandingPage?handle=hein.journals/intaxr14&div=75&id=&page=
- https://www.sciencedirect.com/science/article/abs/pii/S0929119912000892
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
