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Interest is the amount paid for the use of the borrowed money, however Dividend is the amount which a company pays to its shareholders as a part of profit.
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.
Interest is Charge against profit. It should be paid even after profit is not earned by the company. The rate of interest is fixed and is compulsory to pay to its Creditors or lenders or debenture holders
Dividend is Appropriation of profit. It is necessary to have profit for the distribution of dividend. The rate of dividend remains constant in the case of preference shares, but fluctuates in case of equity shares.
In case of Interest tax shield is available because it is a tax deductible expense.Dividend is not a tax deductible expense
Dividends are a distribution of a corporation's earnings to its stockholders. Dividends are not an expense of the corporation and, therefore, dividends do not reduce the corporation's net income or its taxable income.
However, Interest on bonds and other debt is an expense of the corporation. The interest expense will reduce the corporation's net income and its taxable income.
Totally agree with Istiyak Ahmed detailed answer but i want to say a conclusion that interest expense made tax savings
interest paid basically is a return on loans, on the other side dividend paid is return on the equity