Question

For a joint stock company, payment of dividend is

• A. Voluntary
• B. Compulsory
• C. Necessary
• D. None of these

Hint:

Dividend payments are discretionary — companies may retain profits for growth or declare dividends depending on financial health and strategy.

Answer 1

The Correct Option is A

Step 1: Understanding dividend.
A dividend is the portion of profits distributed by a joint stock company to its shareholders as a reward for their investment.
It is declared by the company’s Board of Directors and approved by shareholders during the annual general meeting (AGM).
Step 2: Legal nature of dividend payment.
Payment of dividends is not a legal obligation.
A company may choose to reinvest its profits in business expansion, debt repayment, or other uses.
Only when the Board declares a dividend does it become payable to shareholders.
Step 3: Voluntary nature.
The payment depends on factors like profit availability, liquidity, expansion plans, and dividend policy.
Hence, it is a voluntary decision based on management discretion rather than a compulsory act.
Step 4: Analysis of options.
- (1) Voluntary: Correct — depends on company policy and financial performance.
- (2) Compulsory: Incorrect — no law mandates compulsory dividend payment.
- (3) Necessary: Incorrect — may not always be appropriate.
- (4) None of these: Incorrect.
Step 5: Conclusion.
Thus, for a joint stock company, payment of dividend is voluntary.