Discuss the various characteristics of ‘debentures’.
Discuss the various characteristics of ‘debentures’.
The various characteristics of debentures are explained below :
(a) Specified maturity period—Debentures are issued for a specified period. On the expiry of this period these are redeemed.
(b) Long term debt instrument—Debentures are a part of long-term borrowed funds.
(c) Fixed rate of interest—Debentures carry fixed rate of interest. This rate is prescribed at the time of issue of debentures.
(d) No voting rights—Holders of debentures do not have any voting rights like shareholders.
(e) High financial risk—The borrowing company has to pay the fixed rate of interest as well as has to redeem the debentures on the maturity irrespective of the profits or losses amount so debentures increases financial risk.
The various characteristics of debentures are explained below :
(a) Specified maturity period—Debentures are issued for a specified period. On the expiry of this period these are redeemed.
(b) Long term debt instrument—Debentures are a part of long-term borrowed funds.
(c) Fixed rate of interest—Debentures carry fixed rate of interest. This rate is prescribed at the time of issue of debentures.
(d) No voting rights—Holders of debentures do not have any voting rights like shareholders.
(e) High financial risk—The borrowing company has to pay the fixed rate of interest as well as has to redeem the debentures on the maturity irrespective of the profits or losses amount so debentures increases financial risk.
