Question 33 of 38
Q.Distinguish between the following:
Dividend and Interest
Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2026Subjective· 4mImportance★★★★★
87% · 33/38 Questions
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Start your 14-day free trial to unlock the full solution →Dividend is a reward to owners (shareholders) paid out of profit, while interest is a fixed obligation to lenders (debenture holders/creditors) payable irrespective of profit.
Dividend and interest are two different types of return that a company pays on the funds it uses. They differ fundamentally because they are paid to two different classes of fund providers — owners and lenders.
| Point | Dividend | Interest |
|---|---|---|
| Meaning | Portion of divisible profit distributed to shareholders. | Fixed return paid to creditors for the use of borrowed money. |
| Paid to | Equity and preference shareholders (owners). | Debenture holders, depositors and other lenders. |
| Nature | Appropriation of profit. | Charge against profit. |
| Dependence on profit | Paid only if the company earns a profit. | Payable whether or not there is a profit. |
| Rate | Fluctuating (except fixed preference dividend). | Fixed rate agreed at the time of borrowing. |
| Obligation | Not a compulsory payment. | A compulsory legal obligation. |
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