Question

Which of the following are the features of debentures?

Options

• Debentures represent borrowed funds.

• Interest on debentures is paid only when there is a profit.

• Debentures generally carry voting rights.

• Debentures do not involve a charge on the assets of the company.

Answer 1

Debentures represent borrowed funds.

Explanation:

Debentures are borrowed (debt) instruments because companies issue them to raise long-term funds. Holders are creditors entitled to fixed interest payments irrespective of profits; they normally have no voting rights and are often secured by the company’s assets.