Shares and dividends: cash and bonus
Your family owns shares in a hydropower company. Change the number of shares and the cash and bonus dividends the company declares, and find the cash you receive after tax and the new shares you get.
Core concept
A dividend is declared as a per cent of the face value of a share: a cash dividend is paid in rupees (with 5% tax taken off), and a bonus (stock) dividend is paid in new shares
Topic: Commission and dividend
A company raises money by selling shares. Each share here has a face value of Rs 100. When the company makes a profit, it can share part of it with its shareholders as a dividend, declared as a per cent of the face value. A 10% cash dividend pays Rs 10 for every share, and 5% of it is taken off as tax. A 20% bonus (stock) dividend gives 20 new shares for every 100 shares held. Two similar ideas: an agent who sells something for someone earns a commission, a per cent of the sale; and a company may share part of its profit with its workers as a bonus.
What you will learn
- Calculate a cash dividend from the number of shares, the face value and the per cent declared.
- Take off the tax on a dividend.
- Calculate the bonus shares from a stock dividend.
Before you start
- Know how to find a per cent of an amount.
Materials
- A notebook and a calculator
Equipment
- None
Procedure
- Record 500 shares with a 10% cash and 20% bonus dividend.
- Raise the cash dividend to 20% and record.
- Own 1000 shares with a 25% bonus, and record.
- Make the cash dividend 0% and record.
How this simulation is simplified
- The face value of each share is Rs 100, and the tax on the cash dividend is 5%.