Payment of debentures is made before the ________a)Payment of Profitb)Payment of Share Capitalc)Payment of Dividendd)None of theseCorrect answer is option 'B'. Can you explain this answer?

Question

Accepted Answer

At the time of liquidation the payment to debenture holders is made on the priority bases and then to the shareholders.

Answer

It is because the shareholders  are owners and debenture holders are creditors of the company

Answer

Can the answer be c

Answer

Answer is B because.. it's concept of winding up of company.. during winding up,  liabilities of outsiders are paid first and shareholders are owner of the company...so debenture holders are paid first because debentures are outside liability...

Answer

Payment of debentures is made before the Payment of Share Capital.

Explanation:
Debentures are a form of long-term debt instrument issued by a company to raise funds from the public. They are essentially loans taken by the company, and the company promises to pay back the principal amount along with periodic interest payments to the debenture holders.

On the other hand, share capital represents the ownership stake of the shareholders in a company. Shareholders invest their capital in the company by purchasing shares, and in return, they become partial owners of the company.

Payment of Debentures:
- Debentures are issued by a company to raise funds for various purposes such as expansion, working capital, or debt restructuring.
- When a company issues debentures, it enters into a legal agreement with the debenture holders, which specifies the terms and conditions of the debentures, including the repayment schedule and interest rate.
- The repayment of debentures is generally made in installments over a specified period of time, known as the debenture redemption period.
- The company is obligated to make regular interest payments to the debenture holders as per the terms of the debenture agreement.
- The payment of debentures is prioritized over other financial obligations of the company.

Payment of Share Capital:
- Share capital represents the initial investment made by the shareholders in the company by purchasing shares.
- Shareholders are the owners of the company and have the right to participate in the profits of the company.
- The payment of share capital is made at the time of incorporation or when the company issues new shares through a public offering or private placement.
- The shareholders are not entitled to any fixed rate of return on their investment like the debenture holders.
- The payment of share capital is not subject to any specific repayment schedule and is usually considered as a long-term investment in the company.

In conclusion, the payment of debentures is made before the payment of share capital because debentures represent a debt obligation of the company that needs to be repaid to the debenture holders, whereas share capital represents the ownership stake of the shareholders in the company.

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