Question

debenture interest is payable after the payment of preference dividend but before payment of equity dividend ? true or false
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Answer 1

Answer:

False, it is because first the company pays interest on debenture thereafter dividend is payable

Answer 2

Answer:

False

Explanation:

Debenture Interest-

• Debenture interest is the money that the debenture owner is supposed to earn after investing money in the company's debenture.
• It is paid at a fixed rate based on the face value.
• Interest is a charge imposed on the company that issues a debenture, and it must be paid regardless of the status of revenue.
• It is a charge against profit.
• It is deducted before the payment of tax and preference dividend and equity dividend.
• After deducting the debenture interest from Earning before interest and tax/ profit we get earning before tax.

Calculation of Earning per share-

• Earnings per share (EPS) is calculated by dividing a company's profit by the number of outstanding shares of common stock. The resulting number is used to determine a company's profitability.
• It is arrived to after the deduction of preference dividend which is distributed after deduction of debenture interest and tax.

Hence, we can conclude that the sequence of deductions from profits is debenture interest, then tax then preference dividend and equity dividend at the end.

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