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प्रश्न
State any four disadvantages of debentures.
List the disadvantages of debentures.
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उत्तर
Following are disadvantages of debentures:
- Fixed Obligation: Payment of interest is a fixed commitment of the organization whether it is earning profit or not. Sometimes companies have to borrow funds for payment of interest to debenture holders.
- Reduction in Credibility: Financial institutions and lenders hesitate to lend funds in the companies having more of debentures. The credit-worthiness of a company which has issued a large number of debentures is low.
- Charge on Assets: Usually, debentures are issued against securities of fixed assets. During the time of depression, if a company is unable to pay the regular amount of interest and finds it difficult to repay the amount, in this situation the debenture holders can have claim over the assets of the company.
- No Voting Rights: The debenture holders are not allowed to vote in the management of the company. All the decisions regarding interest rate for debentures are taken by the equity shareholders only. Therefore, they remain at the mercy of equity shareholders.
- Limited Appeal: Debentures have limited appeal to investors since they lack ownership rights and voting power, making them less appealing to those looking for control and significant profits. Also, their fixed interest structure may not appeal to risk-taking investors seeking financial gains.
Notes
Students should refer to the answer according to their question and preferred marks.
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संबंधित प्रश्न
On 1.4.2015 PPR Ltd. issued 1500, 10% debentures of Rs 100 each at a discount of 3%, redeemable at a premium of 8% after three years. The company closes its books on 31st March every year. Interest on 10% debentures is payable on 30th September and 31st March. Rate of tax deducted at source is 10%.
Pass necessary journal entries for the issue of 10% debentures and interest for the year ended 31.3.2016
Give any one advantage for the redemption of debentures by purchase in the open market?
Answer in a sentence only.
What do you mean by Bearer Debenture?
Answer in a sentence only.
What is meant by ‘Mortgaged Debenture’?
Answer in a sentence only.
What is meant by redemption of Debentures?
Write one word/term/phrase which can substitute the following
The acknowledgment of debt under common seal of company.
Write one word/term/phrase which can substitute the following
The debentures of which payment is made on the expiry of specific period.
Write one word/term/phrase which can substitute the following
The debentures of which payment is made on the expiry of specific period.
Write one word/term/phrase which can substitute the following
The debentures which are not converted into shares.
Select most appropriate alternative from those given below :
The debentures which are converted into shares is called____________.
Select most appropriate alternative from those given below :
__________ debentures which are not secured against any charge on asset of the company.
State to whether the following statement is True/False.
Unsecured debentures are safer than secured debentures.
Give the word / term or phrase which can substitute the following statement.
The debentures which are converted into shares.
Answer the question.
Explain any five types of debentures through which a company can collect borrowed capital from the public.
Match the items given in Column I with the headings/subheadings (Balance sheet) as defined in Schedule III of Companies Act 2013.
| Column I | Column II | ||
| (I) | Loose Tools | (a) | Intangible fixed assets |
| (II) | Patents | (b) | Other current assets |
| (III) | Prepaid insurance | (c) | Long term Borrowings |
| (IV) | Debentures | (d) | Inventories |
| (V) | Machinery | (e) | Tangible Fixed assets/Property, Plant and Equipment |
Choose the correct option:
Anthony Ltd. issued 20,000, 9% Debentures of ₹ 100 each at 10% discount to Mithoo Ltd. from whom Assets of ₹ 23,50,000 and Liabilities of ₹ 6,00,000 were taken over. Pass entries in the books of Anthony Ltd. if these debentures were to be redeemed at 5% premium.
