31 May 2009
CAN ANY ONE SUGGEST as we do in AS 20 EPS... IF RIGHT SHARES ARE ISSUED , N WE CALCULATE WEIGHTED NO OF SHARES..... SUPPOSE IN CASE OF DIVIDENDS.. WE HAVE 1000 SHARES ALREADY ISSUED.WE ISSUE 1000 RIGHT SHARES ON 1 JAN... DIV DECLARED ON 31 MARCH...10 %... SHALL WE TREAT IT ON 2000 SHARES OR EQUIVALENT SHARES. 1250(1000{ORIGINAL} + 1000{RIGHT}*3/12). thnx in advance
21 July 2024
When calculating dividends on shares, the key principle is to consider the number of shares entitled to receive the dividend at the dividend declaration date. Let's clarify the scenario based on your description:
1. **Original Shares:** You have 1000 shares already issued before the rights issue.
2. **Rights Issue:** You issue an additional 1000 shares on January 1st.
3. **Dividend Declaration:** The dividend is declared on March 31st.
Now, the question is whether to calculate the dividend on the original 1000 shares only or on the total of 2000 shares (original 1000 shares + rights issue of 1000 shares).
### Calculation Approach:
Typically, dividends are calculated based on the number of shares entitled to receive the dividend as of the dividend declaration date. In your case:
- The rights issue of 1000 shares was done on January 1st. - The dividend was declared on March 31st.
As of March 31st, the rights issue has already taken place, so the dividend will be calculated based on the total number of shares outstanding as of the dividend declaration date. Therefore, you should consider the dividend payable on the **equivalent shares**, which is the total of 2000 shares (original 1000 shares + rights issue of 1000 shares).
### Conclusion:
- **Dividend Calculation:** You should calculate the dividend on the equivalent shares outstanding as of March 31st, which is 2000 shares. - **Reasoning:** The rights issue increases the number of shares outstanding, and shareholders who hold these additional shares are entitled to receive dividends on them from the dividend declaration date onward.
This approach ensures that all shareholders, including those who received the rights issue, are treated fairly based on their ownership of the company's shares at the time the dividend is declared. Therefore, in your case, the dividend should be calculated based on 2000 shares, not just the original 1000 shares.
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