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Difference between interest and dividend

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Difference between interest and dividend

    • Posted by Roshni Kumari 6 years, 2 months ago

    CBSE > Class 12 > Economics
    • 1 answers

    Yogita Ingle 6 years, 2 months ago

    <th>Basis for Comparison</th> <th>Interest</th> <th>Dividend</th>
    Meaning Interest is the charge levied to the borrower, for the use of money, which belongs to somebody else. Dividend is the return paid by the company to its shareholders for the capital invested by them.
    What is it? Charge against profit Appropriation of profit
    Existence of Profit Not necessary, it should be paid even after profit is not earned by the company. Necessary for the distribution of dividend.
    Paid to Creditors or lenders or debenture holders Shareholders
    Compulsory Yes No
    Rate Fixed Remains constant in the case of preference shares, but fluctuates in case of equity shares.
    Tax Tax shield is available because it is a tax deductible expense. Not a tax deductible expense.

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