Dividend is announced by a company on:

Question

Accepted Answer

The correct option is 1:
Dividend is a distribution of a company's profits to its shareholders. Legally and practically, a dividend is only paid on the capital that has been subscribed by the public and subsequently called-up and paid-up by the shareholders. While "subscribed capital" technically refers to the capital promised by the investors, in the context of dividend declaration for an MCQ, it is the most accurate term among the options, as dividends are ultimately paid on the portion of capital for which investors have committed and paid money, which is represented by the subscribed and paid-up shares.

The incorrect option is 2:
Issued capital is the part of authorized capital that the company offers to the public for subscription. It may not always be fully subscribed or fully paid-up by the public. Since dividends are only paid on the capital that is held and paid for by shareholders, Issued capital is an incomplete basis for dividend announcement.

The incorrect option is 3:
Authorized capital, or nominal capital, is the maximum amount of share capital that a company is legally permitted to issue, as stated in its memorandum of association. It simply represents the limit of what the company *can* issue, not the capital that is currently in the hands of shareholders and thus it is not the basis for calculating dividends.

The incorrect option is 4:
Unauthorized capital is a term not recognized in standard company law terminology for share capital components. It refers to capital beyond the maximum limit permitted by the memorandum of association, and therefore, no dividend can be announced or paid on this fictional category of capital.