Q.4 (4) Distinguish between Dividend and Interest.
Best answer
Answer: Distinction between Dividend and Interest
| Point | Dividend | Interest |
|---|---|---|
| Meaning | Portion of divisible profits distributed to shareholders. | Return paid to creditors (debenture holders, depositors) on borrowed funds. |
| Paid to | Shareholders, the owners. | Creditors/lenders. |
| Nature | Appropriation of profit. | Charge against profit. |
| Rate | Not fixed for equity shares; depends on profits. | Fixed rate agreed in advance. |
| Obligation | Paid only if there are profits and it is declared. | Payable whether there is profit or loss. |
| Payment time | Within 30 days of declaration. | On fixed due dates, usually half-yearly or yearly. |
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