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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
The debentures which are convertible into shares.
The debenture holder is owner of the company.
Give the meaning of Debenture?
Tata Ltd. issued 5,000, 10% Debentures of Rs 100 each on 1st April 2012. The issue was fully subscribed. According to the terms of issue, interest on debentures is payable half-yearly on 30th September and 31st March and tax deducted at source is 10%.
Pass the necessary journal entries related to the debenture interest for the half-yearly ending on 31st March 2013 and transfer of interest on debentures to Statement of Profit and Loss.
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
Answer in a sentence only.
What do you mean by Bearer Debenture?
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 which are not converted into shares.
Write one word/term/phrase which can substitute the following
The debentures which are registered in the register of company.
Write one word/term/phrase which can substitute the following
The debentures which are transferred by way of delivery.
Select most appropriate alternative from those given below
__________ is acknowledgment of debt under common seal of company.
Select most appropriate alternative from those given below :
The debentures which are converted into shares is called____________.
State to whether the following statement is True/False.
The acknowledgement of debt under common seal of company in termed as share.
State to whether the following statement is True/False.
The unregistered debentures are known as naked debentures.
Write Short Note on Secured Debentures
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.
