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hi , advantage of debenture for a company is that, “interest is chargeable against profit before tax”
disadvantage of debenture for a company is that ,”interest must be paid out of pre-tax profits .
Please explain both.In simple words ….. interest is an annual expense for a company. It is a pre-tax expense within the Statement of Income, and it HAS to be paid / accrued as a period expense.
This is in contrast to a dividend which is NOT an expense. A dividend is an appropriation of after-tax profits.
So, if a company has no distributable profits available, it is not able to declare a dividend. However, if it has any loans of debentures outstanding, it MUST account for the interest. Even if a pre-interest, pre-tax loss has been sustained, the company must nevertheless increase that loss by accruing for any unpaid period interest
i tried to find what it that “pilot paper” … are this expression to some subject for exam … where can i find it? or what is that, pls? it’s something special ..:))
thnx
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