Differentiate between the following pairs of terms: (i) Interest and profit: (ii) Share and denture (iii) Ordinary share and preference share (iv)Cumulative preference share and participating preference share (v) Cum div and ex div
Explanation
i) interest and profit: is the reward earned from the use of capital while profit is the reward for entrepreneurship
ii) Share and debenture: A share shows part ownership of a company while a debenture is debt owned by a company OR A share earns dividend earnss fixed interest
iii) Ordinary Share and Preference share: Ordinary share is a share whose holder is paid after all other shareholders have received their dividends while preference share has no voting right.
iv) Cumulative preference share and participating preference share: Cumulative preference share is a share whose owner is entitled to payment of unpaid dividend during future years when profit is made while a participating preference share is one whose holder is entitled to extra dividend if certain level of profit is attained.
v) Cum div and ex div: If a person buys shares cum div it means that the dividend that is about to be paid will be his; on the other hand, if a person buys shares ex div it means that the dividend that is to be paid will not be paid to him but to the previous owner.