CA Foundation Exam > CA Foundation Questions > Which of the followings statements is false?a...
Start Learning for Free
Which of the followings statements is false?
- a)Equity is owners' stake and the debenture is a debt
- b)Rate of interest on debentures is fixed
- c)Debenture holders get preferential treatment over the equity holders at the time of liquidation
- d)Interest on debentures is an appropriation of profits
Correct answer is option 'D'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
Which of the followings statements is false?a)Equity is owners' st...
Explanation:
Debentures are a type of long-term debt instrument that companies use to raise funds from the public. On the other hand, equity refers to the ownership stake in a company. Let's analyze each statement to identify the false one.
a) Equity is owners stake and the debenture is a debt: This statement is true. Equity represents the ownership interest in a company, and shareholders are the owners of the company. Debentures, on the other hand, are a form of debt where the company borrows money from investors and promises to repay it at a fixed interest rate.
b) Rate of interest on debentures is fixed: This statement is true. Debentures typically carry a fixed rate of interest, which is predetermined at the time of issuance. This ensures that debenture holders receive a fixed return on their investment.
c) Debenture holders get preferential treatment over the equity holders at the time of liquidation: This statement is true. In the event of liquidation or bankruptcy, debenture holders have a higher claim over the company's assets compared to equity holders. Debenture holders are considered creditors and have a priority in repayment over equity holders, who are the owners of the company.
d) Interest on debentures is an appropriation of profits: This statement is false. Interest on debentures is not an appropriation of profits. It is a financial expense for the company and is deducted from the company's profits before calculating the net profit available for distribution to equity shareholders. It is important to note that interest on debentures is a fixed obligation that the company needs to fulfill, regardless of its profitability.
In conclusion, the false statement is option 'D': Interest on debentures is an appropriation of profits. Interest on debentures is a financial expense for the company and is not considered as an appropriation of profits.
Debentures are a type of long-term debt instrument that companies use to raise funds from the public. On the other hand, equity refers to the ownership stake in a company. Let's analyze each statement to identify the false one.
a) Equity is owners stake and the debenture is a debt: This statement is true. Equity represents the ownership interest in a company, and shareholders are the owners of the company. Debentures, on the other hand, are a form of debt where the company borrows money from investors and promises to repay it at a fixed interest rate.
b) Rate of interest on debentures is fixed: This statement is true. Debentures typically carry a fixed rate of interest, which is predetermined at the time of issuance. This ensures that debenture holders receive a fixed return on their investment.
c) Debenture holders get preferential treatment over the equity holders at the time of liquidation: This statement is true. In the event of liquidation or bankruptcy, debenture holders have a higher claim over the company's assets compared to equity holders. Debenture holders are considered creditors and have a priority in repayment over equity holders, who are the owners of the company.
d) Interest on debentures is an appropriation of profits: This statement is false. Interest on debentures is not an appropriation of profits. It is a financial expense for the company and is deducted from the company's profits before calculating the net profit available for distribution to equity shareholders. It is important to note that interest on debentures is a fixed obligation that the company needs to fulfill, regardless of its profitability.
In conclusion, the false statement is option 'D': Interest on debentures is an appropriation of profits. Interest on debentures is a financial expense for the company and is not considered as an appropriation of profits.
Free Test
FREE
| Start Free Test |
Community Answer
Which of the followings statements is false?a)Equity is owners' st...
Interest on debentures is not an appropriation against the profits but it is a charge against profit because interest on debentures is to be paid to the debenture holders weather we get profit or loss the interest is to be paid even though we get loss so it is to be treated as a charge against the profits therefore option d is the correct answer
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Top Courses for CA FoundationView all
Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer?
Question Description
Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer?.
Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer?.
Solutions for Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer?, a detailed solution for Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? has been provided alongside types of Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Which of the followings statements is false?a)Equity is owners' stake and the debenture is a debtb)Rate of interest on debentures is fixedc)Debenture holders get preferential treatment over the equity holders at the time of liquidationd)Interest on debentures is an appropriation of profitsCorrect answer is option 'D'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup