Let me answer this question with the help of an example

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Presentation transcript:

Let me answer this question with the help of an example What does it mean when we say that dividends can be paid out of distributable surplus? Let me answer this question with the help of an example

Let’s say there is fruit bearing tree gifted to me Let’s say there is fruit bearing tree gifted to me. The owner of the tree has set one condition. He says that I can earn only from the produce of the tree?

Which means that I cannot cut the branches of the trees and sell the wood in the market.

I can water the tree, nurture it so that it bears fruits So what can I do I can water the tree, nurture it so that it bears fruits Now I can certainly sell the fruits in the market

These two visuals tell the story This tree needs to be nurtured The fruits of this tree could be sold for a profit

Similarly SEBI has mandated that dividends should be declared only out of the profits. The profits that a fund earns is called “distributable surplus”

Please give us your feedback at Hope you now understand what it means when we say that dividends can be paid only out of the distributable surplus Please give us your feedback at professor@tataamc.com

Disclaimer The views expressed in these lessons are for information purposes only and do not construe to be of any investment, legal or taxation advice. The contents are topical in nature & held true at the time of creation of the lesson. They are not indicative of future market trends, nor is Tata Asset Management Ltd. attempting to predict the same. Reprinting any part of this presentation will be at your own risk and Tata Asset Management Ltd. will not be liable for the consequences of any such action.