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Mohammad Ali
Mohammad Ali, Accounts & Financial Advisor
Category: Finance
Satisfied Customers: 370
Experience:  Qualified Cost & Management Accountant, with 2 years experience in Financial & Audit Services
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how do i find a companys dividends given total revenue and

Customer Question

how do i find a companys dividends given total revenue and and total ex[enses, also the same in total revenue given expenses and and dividends
Submitted: 8 years ago.
Category: Finance
Expert:  Mohammad Ali replied 8 years ago.

Hello Mickey,

from what information you have provided, I cannot think of a way to calculate dividends. You see, by using total revenue and expenses, you can calculate the "Net profit before tax figure" but not the dividends figure. Let me give you an example: Suppose you have this imaginary information:

revenue: $100,000 opening inventory:$10,000 Purchases: $40,000 Clising Inventory:$6,000 Rent: $700 Salaries: $500 Insurance: $200 Heating and lighting:$300

from this you can make the income statement like this:

revenue 100,000

Less cost of Sales:

Opening Inventory 10,000

Purchases 40,000 50,000

less closing inventory 6,000 44,000

Gross Profit 56,000

Less operational expenses:

Rent 700

Salaries 500

Insurance 200

Heating and lighting 300 1,700

Net Profit before tax 54,300

Taxation(suppose 30%) 16,290

Net profit After tax 38,010

It is after this figure that the company would transfer money to reserves and then decide how much to pay as dividends. Exactly how much dividends a company pays depends upon the growth in company earnings, growth in share price and also the expectations that the market and investors are making of it. It also depends upon the type dividends, for example if they are preference dividends, they will be a fixed payment, if they are ordinary dividends, then the company may choose to announce more dividend than the last year, less dividend than the last year or no dividend at all. It's all a matter of company policy. So from the data you have provided, you can calculate net profit before tax and after tax but not dividends