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Redemption of Debenture (Conversion Method) Video Lecture - Commerce

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FAQs on Redemption of Debenture (Conversion Method) Video Lecture - Commerce

1. What is redemption of debenture?
Ans. Redemption of debenture refers to the process of repayment of the principal amount of debentures by the company to the debenture holders on the maturity date.
2. What is the conversion method of debenture redemption?
Ans. The conversion method of debenture redemption allows the debenture holders to convert their debentures into shares of the company at a predetermined conversion rate. This method provides an option to the debenture holders to become equity shareholders of the company.
3. How does the conversion method work in debenture redemption?
Ans. In the conversion method, the company specifies a conversion ratio, which determines the number of shares that can be obtained by converting one debenture. On the maturity date, the debenture holders have the option to convert their debentures into shares at the predetermined conversion ratio.
4. What are the advantages of debenture redemption through conversion?
Ans. The advantages of debenture redemption through conversion include: - It provides an opportunity for the debenture holders to become shareholders of the company, thereby participating in the company's future growth and profitability. - It helps in reducing the financial burden on the company by converting debt into equity. - It can improve the company's capital structure by increasing the equity base.
5. Are there any risks associated with debenture redemption through conversion?
Ans. Yes, there are certain risks associated with debenture redemption through conversion, such as: - If the company's share price declines significantly, the debenture holders may not find it favorable to convert their debentures into shares. - The conversion ratio may not be favorable to the debenture holders, resulting in a lower number of shares being received upon conversion. - There could be dilution of ownership for existing shareholders if a large number of debentures are converted into shares.
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