21 October 2014
1. Both interest as well as dividends are liabilities of a company and it has to pay them to debtors and shareholders respectively.
2. Interest is fixed and specified in the terms and conditions of debt or bonds; dividends can vary depending upon profits of the company.
3.Interest is considered as an expense of a company and has the effect of reducing tax liability of a company when it is paid. Dividends are not an expense of a company and as such they do not reduce the net income of the company.
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