What is the meaning and definition of debenture?
A debenture is a type of bond or other debt instrument that is unsecured by collateral. Since debentures have no collateral backing, they must rely on the creditworthiness and reputation of the issuer for support. Both corporations and governments frequently issue debentures to raise capital or funds.
What is debenture short answer?
Debentures represent borrowed capital. The debenture holders are creditors of the company. The debenture holder gets a fixed rate of interest as a return on his investment. The Board of Directors has the power to issue debentures. The term ‘debenture’ has come from Latin word ‘debare’, which means to ‘owe”.
What is the meaning of debentures in accounting?
Definition: A medium or long term debt format that large companies use to borrow money. A debenture is one of the most typical forms of long term loans that a company can take. In the US, most debentures are unsecured, but elsewhere debentures are typically secured through the borrower’s assets.
What is types of debentures?
The major types of debentures are:
- Registered Debentures: Registered debentures are registered with the company.
- Bearer Debentures:
- Secured Debentures:
- Unsecured Debentures:
- Redeemable Debentures:
- Non-redeemable Debentures:
- Convertible Debentures:
- Non-convertible Debentures:
What is the difference between a loan and a debenture?
Debentures are capital raised by a company by accepting loans from general public. Debentures are transferable while loans are not. • Debentures do not need any collateral from the company whereas loans need collateral.
What is the difference between shares and debentures?
Share is the capital of the company, but Debenture is the debt of the company. The shares represent ownership of the shareholders in the company. On the other hand, debentures represent indebtedness of the company. The income earned on shares is the dividend, but the income earned on debentures is interest.
Why do banks take debentures?
Banks and financial institutions use the debenture to secure their interests when providing any kind of finance where they believe there is a risk to them. Usually, the debenture will be registered on a fixed and floating charge basis to provide additional security for the bank or financial institution.
What is equity and debentures?
Shares are ownership securities. The holders of shares are the owners of a company. Debentures are creditorship securities. Equity shares capital is not to be returned back except in the case of liquidation. The amount of debentures is paid back to debenture-holders after a fixed time.
