Question

Discuss the various characteristics of ?Debentures ? as a main source of long term
Source of finance.

Answer 1

Dear Student,
Following are the Characteristics of Debentures:

• Debentures are instruments of debt, which means that debenture holders become creditors of the company
• Debentures have a fixed rate of interest, and such interest amount is payable yearly or half-yearly
• Debenture holders do not get any voting rights. This is because they are not instruments of equity, so debenture holders are not owners of the company, only creditors
• The interest payable to these debenture holders is a charge against the profits of the company. So these payments have to be made even in case of a loss.

Regards.