Final answer:
The date on which a company determines who will receive a dividend is the record date. This decision, among others concerning financial management, is made by the board in public companies. Dividends distribute a portion of profits to shareholders based on their share count.
Step-by-step explanation:
The date on which a company determines the registered owners of stock who will receive a dividend is the record date. Decision-making about the financial management of a firm, including the issuance of stocks, the distribution of dividends, and the re-investment of profits, differs between private and public companies. In public companies, these decisions are typically made by the board of directors and then conveyed to shareholders. It is important for shareholders to understand that when stock is sold to the public for the first time, it's called an initial public offering (IPO), and the firm receives financial capital. Afterwards, when a shareholder sells their stock to another investor, the company does not receive any funds. Dividends provide a portion of a company's profits to shareholders, with the amount received being proportional to the number of shares owned.
For example, stable companies like Coca-Cola often provide dividends as a form of return to their investors. If a stock pays a dividend of 75 cents per share, an owner of 85 shares would receive a total dividend payment calculated based on this rate and their share count. This represents one form of return on investment, the other being capital gains realized from the sale of the stock at a higher price than it was purchased. Understanding these aspects of stock ownership and corporate financial policies is crucial for investors and anyone studying business or finance.