Question

Interest on debentures has to be paid even if the company is not earning a profit. Justify.

Answer 1

Interest on debentures is considered a charge against profits and must be paid regardless of whether the company earns a profit or not. This is justified because a debenture represents a debt obligation. Debentureholders are not owners of the company, and therefore, they do not receive higher interest even when the company earns huge profits.