Liquidating dividend definition
Liquidating dividend is a payment of a dividend to stockholders that exceeds the company's retained earnings.Once retained earnings is depleted, capital accounts such as additional paid-in capital are decreased to make up for the remaining dividend to be paid to stockholders.A company distributes part of the company's profit to shareholders as a regular dividend.This dividend is paid from a company's retained earnings which represents the accumulation of all profit earned by the company since it started operating.The total dividend is: = .00 x 200,000 shares = 0,000 The total dividend will be 0,000.The company must use its retained earnings balance of 0,000 first and the remainder of the dividend, 0,000 (0,000 - 0,000), will come from the company's paid-up capital.When a company has more liabilities than assets, equity is negative and no liquidating distribution is made at all.
She owns 1,000 shares and would receive a total dividend of ,000 (.00 x 1,000).
Liquidating dividends are distributions to shareholders that comes from its capital base or the amount that shareholders invested in the company.
A liquidating dividend represents a return of the shareholder's original investment.
Sharon has only received regular dividends before and is not familiar with a liquidating dividend. Regular dividends are distributions of the company's profit that the company pays to its shareholders or owners.
Regular dividends are paid out of a company's retained earnings or the earnings it has accumulated every year since it has been in operation.
The amount of the total dividend representing the regular dividend is: = $200,000 retained earnings / 200,000 shares = $1.00 per share The liquidating dividend of the total dividend is calculated as follows: = $3.00 total dividend - $1.00 regular dividend = $2.00 per share The retained earnings are subtracted from the total dividend balance; and then this amount is divided by the total number of shares to get the regular dividend.