Advertisements
Advertisements
Question
Justify the following statement.
Interest is a liability/obligation of the company.
Solution
Interest is the cost of renting money, for the borrower and it is the income from lending money to the lender.
Features of interest are:
- Interest is the price paid for the productive services rendered by capital.
- It is directly related to risk. The higher the risk, the higher the interest.
- The rate of Interest is expressed as an annual percentage of the Principal.
- The rate of interest is determined by various factors like money supply, fiscal policy, the volume of borrowings, the rate of inflation, etc.
- Interest is a charge against the profit of the company. Even if the company makes no profit, interest should be paid.
- It is payable at a fixed and generally pre-determined rate.
The company has to pay interest if it has borrowed money from creditors like Debentures holders, Depositors, Bondholders, etc. Thus, interest is a liability/obligation of the company.
RELATED QUESTIONS
______ is a return paid to creditors by the company.
Write a word or a term or a phrase which can substitute the following statement.
The return paid to the creditors by the company.
State whether the following statement is true or false.
Interest is a liability for company.
State whether the following statement is true or false.
Interest is paid to shareholders of company.
Find the odd one.
Select the suitable option for the following.
____________ Final Dividend.
Select the suitable option for the following.
Deposit Holders ____________.
Correct the underlined word and rewrite the following sentence:
Dividend is an obligation to be paid by a company every year.
Explain the following term/concept.
Interest
Distinguish between the following:
Dividend and Interest
Explain the features of Interest.
Answer the following question.
What is Interest? Explain its features.
The reward given for the use of capital
What do you mean by interest?
