Debenture Replace Value Choice For Free

Often issue or circulation of debentures is done as collateral security. (A) Meaning of debenture. Debenture is a written instrument acknowledging a debt under the common seal of the company. It contains a contract for repayment of principal after a specified period and for payment of interest at a fixed rate.

An example of something is a particular situation, object, or person which shows that what is being claimed is true.

A debenture is essentially a long-term loan that a corporate or government raises from the public for capital requirements. For example, a government raising funds to construct roads for the public.

A debenture issue is similar to an issue of shares. Issuing of the prospectus, invitation of applications, and issuing of letters of allotment are all part of the process. The registration fees and/or application fees collected upfront from interested parties are refunded in case the application is rejected.

If a company needs money without reducing its equity status, the Company selects a Debentures Issue. It is a debt to the Company. It is similar to borrowing money that needs to be repaid over a while. Debentures have a fixed interest rate.

Debentures are advantageous for companies since they carry lower interest rates and longer repayment dates as compared to other types of loans and debt instruments.

What is a Debenture? A debenture is a bond issued with no collateral. Instead, investors rely upon the general creditworthiness and reputation of the issuing entity to obtain a return of their investment plus interest income.Examples of debentures are Treasury bonds and Treasury bills.

The use of debentures can encourage long-term funding to grow a business. It is also cost-effective when compared with other forms of lending. Debentures usually provide a fixed rate of interest for the lender, and this has to be paid before any dividends are issued to shareholders.

In bond investing, face value (par value) is the amount paid to a bondholder at the maturity date, as long as the bond issuer doesn't default.For example, if interest rates are higher than the bond's coupon rate, then the bond is sold at a discount (below par).

Advantage of DebenturesDebentures do not give right either to vote or take part in the management of the company.The Debenture is tax deductible expenditure which can save income tax.Cost of debenture is relatively lower than preference shares and equity shares.Debentures are advantageous during times of inflation.More items...