Q.Explain Interim Dividend.

Interim dividend is a dividend declared by the Board of Directors in the middle of a financial year, before the annual accounts are finalised and before the AGM, out of the profits of the current year or accumulated profits.

Meaning: A company normally declares a final dividend at its Annual General Meeting after the accounts for the year are audited and approved. However, when the company is doing well during the year, the Board of Directors may declare an interim dividend in between two AGMs, that is, before the financial year closes and its final accounts are ready.

Key features:

• Declared by the Board: unlike the final dividend, which is recommended by the Board but declared by the shareholders in the AGM, an interim dividend is declared by the Board of Directors themselves; it does not need prior shareholder approval.
• Timing: it is declared and paid during the financial year, in between two annual general meetings.
• Source: it is paid out of the profits of the current financial year (surplus in the profit and loss account, including accumulated profits transferred to reserves), so the Board must be reasonably sure of the year's profitability before declaring it. …