Certified Financial Management Specialist Practice Exam

Who typically declares dividends for a company?

1. The shareholders

2. The company's board of directors

3. The financial analysts

4. The CEO only

The correct answer is: The company's board of directors

Dividends are typically declared by the company's board of directors, which serves as the governing body responsible for overseeing the company’s operations and making strategic decisions. This board has the authority to determine when and how much dividend to distribute to shareholders. Their decision is based on various factors, including the company’s profitability, future investment opportunities, and overall financial health. Shareholders themselves do not have the authority to declare dividends; rather, they benefit from the declaration made by the board. While various stakeholders, including financial analysts and even the CEO, may provide input or insights that could influence the board’s decision on dividends, it is the board that formally declares them. Furthermore, the CEO may propose a dividend policy or suggest the amount based on the company's performance, but the final decision resides with the board of directors.