Question

State with reasons whether the following statement is True or False.

Debenture holders are creditors of the company.

Options

• True

• False

Answer 1

This statement is True.

Reason:

Debenture holders are considered creditors of the company because:

• They lend money to the company by purchasing debentures, which are a type of loan instrument.
• A debenture is a debt and not an ownership instrument like shares.
• Debenture holders receive a fixed interest rate (whether the company earns profit or not).
• They have no ownership rights, but they can be repaid with interest per the debenture’s terms.