What is the definition or difference between share, debenture and loan ?
Dear Student,
The difference between Shares and Debentures is given below-
Basis of Difference
Shares
Debentures
1. Owner or Creditor
Share holders are the owners since shares forms a are part of owned capital
Debenture holder are Creditors since debentures are a part of loan
2. Voting Rights
Share holders have the voting rights
Debenture holders do not have any voting rights.
3. Returns
Share holders are entitled for returns in the form of dividend.
Debenture holders are entitled for returns in the form of interest.
4. Rate of Return
The rate of dividend is not fixed and varies from year to year.
The rate of interest is fixed and do not vary from year to year.
5. Obligations of Return
Dividend is appropriation of profit. Dividend will not be paid if losses are incurred by the company
Interest is charged against profit, interest is payable even if there is no profit.
6. Repayment of Amount
The amount of share is not returned during the life time of the company
The amount of debenture is returned according to the term of issue.
7. Issue
The issue of shares at discount need adherence to the restrictions imposed by the Section 79 of the Company Act.
There are no such restrictions for issuing debentures a on discount.
8. Conversion
Shares cannot be converted into debentures.
Debentures can be converted into shares.
9. Risk
Shares are more risky than debenture as these are unsecured.
If debentures are secured against asset, the risk involved is the minimal.
10. Repayment Priority
Payment to the share holders is made after settlement of all external liabilities, i.e. after debenture holders.
Payment to the debenture holders is made before the share holders.
Loan is an arrangement in which the lender gives money or property to a borrower and the borrower agrees to return it with interest at some point of time in future.
At the time of winding up of the company, payment is done to the creditors (that is loan givers) first, then to the debenture holders and at last, to the share holders.
Regards
Dear Student,
The difference between Shares and Debentures is given below-
|
Basis of Difference |
Shares |
Debentures |
|
|
|
1. Owner or Creditor |
Share holders are the owners since shares forms a are part of owned capital |
Debenture holder are Creditors since debentures are a part of loan |
|
|
|
2. Voting Rights |
Share holders have the voting rights |
Debenture holders do not have any voting rights. |
|
|
|
3. Returns |
Share holders are entitled for returns in the form of dividend. |
Debenture holders are entitled for returns in the form of interest. |
|
|
|
4. Rate of Return |
The rate of dividend is not fixed and varies from year to year. |
The rate of interest is fixed and do not vary from year to year. |
|
|
|
5. Obligations of Return |
Dividend is appropriation of profit. Dividend will not be paid if losses are incurred by the company |
Interest is charged against profit, interest is payable even if there is no profit.
|
|
|
|
6. Repayment of Amount |
The amount of share is not returned during the life time of the company |
The amount of debenture is returned according to the term of issue. |
|
|
|
7. Issue |
The issue of shares at discount need adherence to the restrictions imposed by the Section 79 of the Company Act. |
There are no such restrictions for issuing debentures a on discount. |
|
|
|
8. Conversion |
Shares cannot be converted into debentures. |
Debentures can be converted into shares. |
|
|
|
9. Risk |
Shares are more risky than debenture as these are unsecured. |
If debentures are secured against asset, the risk involved is the minimal. |
|
|
|
10. Repayment Priority |
Payment to the share holders is made after settlement of all external liabilities, i.e. after debenture holders. |
Payment to the debenture holders is made before the share holders. |
||
Loan is an arrangement in which the lender gives money or property to a borrower and the borrower agrees to return it with interest at some point of time in future.
At the time of winding up of the company, payment is done to the creditors (that is loan givers) first, then to the debenture holders and at last, to the share holders.
Regards
