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Debentures: Presented By: Ashish Lokesh Upalee Sakshi

Debentures are units of loans that companies use to raise funds for business activities. They help reduce a company's cost of capital and design an appropriate capital structure. Debentures can be secured or unsecured, convertible or non-convertible, redeemable or irredeemable. They provide advantages like no loss of company control and interest payments being tax deductible, but also have disadvantages like high costs and minimum denominations that limit individual investment. Debentures differ from shares in that debenture holders are creditors rather than owners, have no voting rights, receive fixed interest payments from profits, and can recover their investment at maturity.

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53 views10 pages

Debentures: Presented By: Ashish Lokesh Upalee Sakshi

Debentures are units of loans that companies use to raise funds for business activities. They help reduce a company's cost of capital and design an appropriate capital structure. Debentures can be secured or unsecured, convertible or non-convertible, redeemable or irredeemable. They provide advantages like no loss of company control and interest payments being tax deductible, but also have disadvantages like high costs and minimum denominations that limit individual investment. Debentures differ from shares in that debenture holders are creditors rather than owners, have no voting rights, receive fixed interest payments from profits, and can recover their investment at maturity.

Uploaded by

Lokesh Sha
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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DEBENTURES

PRESENTED BY: ASHISH LOKESH UPALEE SAKSHI

MEANING
Debenture is the unit of loan. Debenture is used for raising the funds for financing the business activities It helps reducing the cost of capital. Designing appropriate capital structure of the company. Its a bond issued by company under its seal.

Definition
As per section 2(12) of Companies Act 1956, Debenture includes debenture stock, bond and any other securiti es of the company whether constituting a charge on the companys assets or not.

Security

Convertibility

Permanence

Negotiability

Priority

Secured

Convertible

Redeemable

Registered

First mortgage

Unsecured

Nonconvertible

Irredeemable

Nonregistered

Second mortgage

Advantages
Control of company is not surrendered to debenture holders because they do not have any voting rights. Interest on debenture is an allowable expenditure under income tax act. Debenture can be redeemed when company has surplus funds.

Disadvantages
Cost of raising capital through debentures is high because of high stamps duty. Common people cannot buy debenture as they are of high denominations. They are not meant for companies earning greater than the rate of interest which they are paying on the debentures.

How do you issue Debentures?


Against cash (at par, at discount and at premium) As consideration other than cash

As collateral security

Difference between Shares and Debentures


Debentures Shares

Debenture holders are the creditors of the company Debenture holders have no voting rights Debenture interest is paid at a pre-determined fixed rate. Interest on debentures are the charges against profits.

Shareholders are the owners of the company Share holders have voting rights Dividend on equity shares is paid at a variable rate and dividend on preference shares is paid at a fixed rate Dividends are appropriation of profits

Cont..
Debentures Shares

In Balance sheet, debentures are shown under Secured Loans. Debentures can be converted into shares. Debentures cannot be forfeited for non-payment of calls money. At maturity, debenture holders get back their money as per the terms and conditions of redemption.

In Balance sheet, Shares are shown under Share capital. Shares cannot be converted into Debentures. Shares can be forfeited for non-payment of allotment or calls money. Equity share holders cannot get back their money , before the liquidation of the company.

THANK YOU

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