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Redemption of debentures - Commerce Video Lecture

FAQs on Redemption of debentures - Commerce Video Lecture

1. What is the meaning of redemption of debentures?

Ans. Redemption of debentures refers to the process of repaying or returning the debentures or bonds to the debenture holders by the company. It is done by paying back the principal amount along with any interest due to the debenture holders.

2. How can a company redeem its debentures?

Ans. A company can redeem its debentures in the following ways: - By paying back the principal amount along with interest to the debenture holders on the maturity date. - By exercising a call option, which allows the company to redeem the debentures before the maturity date. - By converting the debentures into equity shares, if there is a provision for conversion.

3. What are the advantages of redeeming debentures for a company?

Ans. The advantages of redeeming debentures for a company include: - Reduced interest burden: Once the debentures are redeemed, the company no longer has to pay interest on them, leading to cost savings. - Improved creditworthiness: Redeeming debentures enhances the company's creditworthiness as it shows the company's ability to fulfill its financial obligations. - Increased investor confidence: Redeeming debentures on time creates a positive image of the company among the investors, attracting more investment opportunities.

4. Can a company redeem its debentures before the maturity date?

Ans. Yes, a company can redeem its debentures before the maturity date if there is a provision for an early redemption, known as a call option. The call option allows the company to repay the debenture holders before the specified maturity date. However, the company may be required to pay a premium or additional amount to exercise the call option.

5. What happens if a company fails to redeem its debentures on the maturity date?

Ans. If a company fails to redeem its debentures on the maturity date, it is considered a default. The debenture holders can take legal action against the company to recover their investment. The company may also face damage to its reputation and creditworthiness, making it difficult to raise funds in the future. In some cases, the debenture holders may also have the right to convert their debentures into equity shares of the company.

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Jan 11, 2025 Last updated

Redemption of debentures - Commerce for Commerce2025 is part of Commerce preparation. The notes and questions for Redemption of debentures - Commerce have been prepared according to the Commerce exam syllabus. Information about Redemption of debentures - Commerce covers all important topics for Commerce2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Redemption of debentures - Commerce.

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