Question

What is the relationship between dividends and earnings?

Answer 1

Earning is net funds available after meeting all the opearing and non operaing expenses of the organization. Earning have also called balance available to common shareholders and preference shareholders. After Net Earning there is first distribure the dividend to Preferencse shareholders and remain balance if any can be pay to common shareholders.

So if there is positive earnings than there is maximum posibilities to pay the dividend to shareholders and if there is negatice earnings than there is very less chances to pay off the dividend to shareholders.

So there is direct relationship between earnings and retained earning. IF the Earnings are good than dividend is also good and if there is negative earnings than few chances to get dividends.