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Consider the following statements about a debenture in Corporate Finance
1. It is a debt instrument
2. Its freely transferable
3. Its holder has voting rights in company’s annual general meetings
4. It is a part of company’s capital structure
Which among the above statements is/ are correct?
1 and 2
2 and 3
3 and 4
1, 2 and 4
Only codes 1,2&4 are correct.
In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowledges it, but in some countries the term is now used interchangeably with bond, loan stock or note.
A debenture is thus like a certificate of loan or a loan bond evidencing the company's liability to pay a specified amount with interest. Although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.
A debenture is a financial instrument that is used by a lender, such as a bank, to provide capital to businesses and individuals. It allows the lender to secure loan repayments against the borrower's assets – even if the borrower fails to make the payment.
A debenture can impose either a fixed or floating charge. A fixed charge is typically imposed on a tangible asset, such as real estate.
Debentures are debt financial instruments issued by private firms that are not backed by any collateral or real assets.
Debenture is a debt instrument and freely transferable. It makes a part of company’s capital but its holders are not able to participating in the voting in the annual general meetings. Hence option 4th is correct.
By: Abhipedia ProfileResourcesReport error
aquib siddiqui
4th option may be wrong as debenture is a part of loan of the company not capital of the company
A debenture is a financial instrument that is used by a lender, such as a bank, to provide capital to businesses and individuals. It allows the lender to secure loan repayments against the borrower's assets – even if the borrower fails to make the payment. Although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.
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