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Introduction to Debenture Video Lecture - Commerce
FAQs on Introduction to Debenture Video Lecture - Commerce
| 1. What is a debenture? |  |
Ans. A debenture is a type of long-term debt instrument issued by corporations or governments to raise funds. It is essentially a loan agreement between the issuer and the debenture holders, who are entitled to receive regular interest payments and repayment of the principal amount at maturity.
| 2. How are debentures different from shares? | |
Ans. Debentures and shares are both types of financial instruments, but they differ in terms of ownership and payment structure. Debentures represent debt and do not confer ownership rights, whereas shares represent equity and represent ownership in a company. Additionally, while dividend payments on shares are discretionary, interest payments on debentures are contractual and fixed.
| 3. Are debentures secured or unsecured? | |
Ans. Debentures can be either secured or unsecured. Secured debentures are backed by specific assets of the issuer, such as property or equipment, which can be sold to repay debenture holders in case of default. Unsecured debentures, on the other hand, do not have any collateral and rely solely on the issuer's creditworthiness for repayment.
| 4. What is the difference between convertible and non-convertible debentures? | |
Ans. Convertible debentures are those that can be converted into shares of the issuing company at a predetermined conversion ratio and price. This gives debenture holders the opportunity to participate in the company's equity upside. Non-convertible debentures, on the other hand, cannot be converted into shares and remain as fixed-income instruments throughout their tenure.
| 5. How do debentures rank in terms of priority during liquidation? | |
Ans. In case of liquidation or bankruptcy, debentures are generally considered as senior to equity shares but junior to secured loans. This means that debenture holders have a higher claim on the company's assets than equity shareholders but may have a lower priority compared to secured creditors when it comes to repayment. The specific ranking and priority can vary depending on the terms and conditions of the debenture agreement.
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Nov 16, 2024 Last updated |
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