COMMERCE 3FA3 Chapter : 3FA3-CH17.docx

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 3FA3
• Professor: Trevor Chamberlain

Document Summary

Dividend: payment made out of a firm"s earnings to its owners, in the form of cash or stock. Distribution: payment made by a firm to its owners from sources other than current or accumulated earnings. A cash dividend payment reduces corporate cash and retained earnings, except in the case of a liquidating dividend (where capital may be reduced) Declaration date: date on which the board of directors passes a resolution to pay a dividend. Ex-dividend date: date 2 business days before the date of record, establishing those individuals entitled to a dividend. Date of record: date on which holders of record are designated to receive a dividend. Date of payment: date on the dividend cheques. Residual dividend approach: policy where a firm pays dividends only after meeting its investment needs while maintain a desired debt-to-equity ratio. Target payout ratio: a firm"s long-term desired dividend-to-earnings ratio.