Differentiate between the following pairs of terms: (i) Interest and profit: (ii) Share and denture (iii) Ordinary share and preference share (iv)Cumulative...

Answer Details

(i) Interest and profit: Interest is the fee paid to a lender for borrowing money, while profit is the amount of money earned by a business after deducting all expenses from revenue.

(ii) Share and debenture: Shares represent ownership in a company, giving the shareholder a stake in its profits and losses, while debentures represent a loan made to a company by an investor, with the promise of repayment with interest.

(iii) Ordinary share and preference share: Ordinary shares represent ownership in a company with voting rights, while preference shares offer fixed dividends but do not give voting rights to shareholders.

(iv) Cumulative preference share and participating preference share: Cumulative preference shares receive unpaid dividends from previous years before any dividends are paid to other shareholders, while participating preference shares have the right to receive additional dividends beyond the fixed rate if the company performs well.

(v) Cum div and ex div: Cum div refers to a stock being bought with the right to receive the next dividend payment, while ex div refers to a stock being bought after the right to receive the next dividend payment has already been detached from the stock.