Question

Debenture is known as creditorship securities. State the reason:

Options

• They have the right to elect directors.

• Debentures represent borrowed funds.

• They enjoy voting rights in the management and control of the company.

• Debenture holders are the creditors of a company.

Answer 1

Debentures represent borrowed funds.

Explanation:

Debentures are instruments by which a company borrows money; they create a creditor-debtor relationship, requiring fixed interest payments and repayment of principal. Debenture holders are creditors, not owners, and generally lack voting rights.