With the issue of debentures, the capacity of a company to further borrow funds reduces.

True

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False

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Solution

The correct option is A
True

True. Each company has certain borrowing capacity. With the issue of debentures, the capacity of a company to further borrow funds reduces.

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Similar questions

Q. A company can raise funds through issue of debentures, which bear a ________ rate of interest.

Q. State True/False with reasons:
debenture capital is a borrowed capital or Debenture is a Loan Capital of the company.

Q22. Consider the following statements:

1. Non-convertible debentures are used as tools to raise long-term funds by companies through a public issue.

2. To compensate for this drawback of non-convertibility, lenders are usually given a higher rate of return compared to convertible debentures.

Which of the following statements are correct?

Q. State True/False with reasons:
Redeemable debentures are repaid on winding up of the company.

On April 01, 2014 a company issued 15% debentures of Rs 10,00,000 at par. The debentures were redeemable at par after three years from the date of Issue. A sinking fund was set up to raise funds for redemption of debentures. The amount for the purpose was invested in 6% Government securities of Rs 100 each available at par. The sinking fund table shows that if investments earn 6% per annum, to get Re.1 at the end of 3 years, one has to invest Rs 0.31411 every year together with interest that will be earned. On March 31, 2017, all the Government securities were sold at a total loss of Rs 6,000 and the debentures were redeemed at par.

Prepare Debentures Account Sinking Fund Account, Sinking Fund Investment Account and Interest on Sinking Fund Investment Company closes its books of accounts every year on March 31.

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With the issue of debentures, the capacity of a company to further borrow funds reduces.

The correct option is A True True. Each company has certain borrowing capacity. With the issue of debentures, the capacity of a company to further borrow funds reduces.

The correct option is A
True

True. Each company has certain borrowing capacity. With the issue of debentures, the capacity of a company to further borrow funds reduces.