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Direction: Choose the correct answer to the following questions from the given alternatives:
Debenture holders are:
  • a)
    Owners of the company
  • b)
    Creditors of the company
  • c)
    Investors of the company
  • d)
    Directors of the company
Correct answer is option 'B'. Can you explain this answer?
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Direction: Choose the correct answer to the following questions from t...
Debenture holders are creditors of the company


  • Definition: Debenture holders are individuals or institutions that lend money to a company by purchasing debentures issued by the company.


  • Creditors: Debenture holders are considered creditors of the company because they have provided funds to the company in exchange for the debentures.


  • No ownership rights: Unlike shareholders, debenture holders do not have ownership rights in the company. They are merely lenders who are entitled to receive interest payments and the repayment of the principal amount.


  • Prior claim: In case of liquidation or bankruptcy, debenture holders have a prior claim on the company's assets over shareholders. This means that they are entitled to be repaid before shareholders receive anything.


  • Interest payments: The company is required to make regular interest payments to debenture holders as per the terms of the debenture agreement. Failure to make these payments can lead to default.


  • Risk: Investing in debentures involves a certain level of risk as the company may default on its payments, leading to potential losses for the debenture holders.

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Direction: Choose the correct answer to the following questions from the given alternatives:Debenture holders are:a)Owners of the companyb)Creditors of the companyc)Investors of the companyd)Directors of the companyCorrect answer is option 'B'. Can you explain this answer?
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