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Which of the following statements is false?
- a)A company can issue convertible debentures
- b)Debentures cannot be secured
- c)A company can issue redeemable debentures
- d)Debentures have no right to participate in profits over and above their fixed interest
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
Which of the following statements is false?a)A company can issue conve...
The false statement among the given options is:
B: Debentures cannot be secured
Explanation:
- A: A company can issue convertible debentures
- Companies have the option to issue convertible debentures, which can be converted into equity shares of the company at a predetermined rate and within a specified time period.
- B: Debentures cannot be secured
- This statement is false. Debentures can be secured by the assets of the company, known as secured debentures. Secured debentures provide an additional level of security to the debenture holders as they have a claim on specific assets of the company in case of default.
- C: A company can issue redeemable debentures
- Companies can issue redeemable debentures, which means that the debentures have a fixed maturity date and the company is obligated to repay the principal amount to the debenture holders on or before that date.
- D: Debentures have no right to participate in profits over and above their fixed interest
- Debenture holders do not have any right to participate in the profits of the company beyond the fixed interest rate mentioned in the debenture agreement. Their returns are limited to the fixed interest payments.
Therefore, the false statement is B: Debentures cannot be secured.
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Which of the following statements is false?a)A company can issue conve...
Debentures and their characteristics:
Debentures are long-term debt instruments issued by companies to raise funds. They have certain characteristics that make them unique financial instruments.
Convertible debentures:
- A company can issue convertible debentures, which give the holder the option to convert them into equity shares after a certain period of time. This provides flexibility to the investor and can be attractive in certain situations.
Redeemable debentures:
- A company can issue redeemable debentures, which means that the company has the option to buy back the debentures at a specified future date. This provides a certain level of security to the investor.
Participation in profits:
- Debentures do not have a right to participate in profits over and above their fixed interest. Unlike equity shareholders, debenture holders do not have ownership rights in the company and are entitled only to the fixed interest specified in the debenture agreement.
Secured debentures:
- Debentures can be secured by company assets, which means that in case of default by the company, the debenture holders have a claim on the specified assets to recover their investment. This provides a level of security to the debenture holders.
In conclusion, the statement "Debentures cannot be secured" is false. Debentures can indeed be secured by company assets, providing a level of security to the investors.
Debentures are long-term debt instruments issued by companies to raise funds. They have certain characteristics that make them unique financial instruments.
Convertible debentures:
- A company can issue convertible debentures, which give the holder the option to convert them into equity shares after a certain period of time. This provides flexibility to the investor and can be attractive in certain situations.
Redeemable debentures:
- A company can issue redeemable debentures, which means that the company has the option to buy back the debentures at a specified future date. This provides a certain level of security to the investor.
Participation in profits:
- Debentures do not have a right to participate in profits over and above their fixed interest. Unlike equity shareholders, debenture holders do not have ownership rights in the company and are entitled only to the fixed interest specified in the debenture agreement.
Secured debentures:
- Debentures can be secured by company assets, which means that in case of default by the company, the debenture holders have a claim on the specified assets to recover their investment. This provides a level of security to the debenture holders.
In conclusion, the statement "Debentures cannot be secured" is false. Debentures can indeed be secured by company assets, providing a level of security to the investors.
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Which of the following statements is false?a)A company can issue convertible debenturesb)Debentures cannot be securedc)A company can issue redeemable debenturesd)Debentures have no right to participate in profits over and above their fixed interestCorrect answer is option 'B'. Can you explain this answer?
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