Question

differentiate between shares and debentures as sources of long term finance

Answer 1

Dear student,

Shares are owner's funds while debentures are borrowed funds.
Share represents capital of the company while debentures represent debt.
Shares can be used for financing limited needs of company while debentures can be used for financing large financial requirements.
Equity share capital can be retained for lifetime of the company while debentures can not to be retained for long.
A company is not required to pay dividend on equity if it incur loss while in case of debentures, it is obligatory for company to pay interest even if it has incurred losses.

Regards