Advantages and disadvantages of debenture

Answer 1

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This is a form of long term loan that can be taken out by a public limited company for a large sum and it will be paid back over several years. It is usually borrowed from specialist financial institutions. Limited companies can issue debentures to the public. The firm commits itself to repay with interest for up to 25 years.

+ Long term loans Up to 25 years.

- Interest charge and it would be paid on the loan whether or not profits are made this is an expense.

they are mentioned along shares but are not shareholders

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Avilene Almeida writes:

Debenture holders or suppliers of loan capital have no controlling interest in the Company.

The cost of debt is lower than cost of equity or preference shares as interest is tax deductible.

Debenture help in mobilization of savings from the public particularly from tose investors who are risk aversive.