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Debentures offer several advantages over shares, primarily in terms of fixed returns and risk. Debenture holders receive regular interest payments, providing a predictable income stream, while shareholders may receive variable dividends that are not guaranteed. Additionally, debentures generally carry lower risk, as they have a higher claim on assets in the event of liquidation compared to shareholders. Lastly, issuing debentures can be less dilutive to ownership, allowing existing shareholders to maintain greater control over the company.
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What Advantages does issue of debentures over equity shares?
Cost is the major advantage. Debentures are to be serviced for the contracted period of time, while equity servicing is perennial.
What are the advantages and disadvantages of shares and debentures?
Shares offer the advantage of potential capital appreciation and dividends, giving investors a stake in the company's growth and profits. However, they come with higher risk, as shareholders may lose their investment if the company underperforms. Debentures provide fixed interest returns and are generally less risky, as they have priority over shares in the event of liquidation. On the downside, debentures typically offer lower returns compared to shares and lack the potential for capital gains.
What are examples of Debentures?
Debentures are a type of debt instrument that companies issue to raise capital, representing a loan made by investors to the issuer. Examples include convertible debentures, which can be converted into equity shares, and secured debentures, which are backed by specific assets of the company as collateral. Other types include unsubordinated debentures, which have priority over other debts in case of liquidation, and zero-coupon debentures, which do not pay interest but are issued at a discount to their face value.
Why are the type of debentures?
Debentures are categorized based on various characteristics, such as security, convertibility, and redemption. Secured debentures are backed by collateral, while unsecured debentures rely on the issuer's creditworthiness. Convertible debentures can be transformed into equity shares, while non-convertible debentures cannot. Additionally, redeemable debentures have a fixed maturity date for repayment, whereas irredeemable debentures do not have a set repayment term.
What is the advantages and disadvantages of debentures?
You get a fixed preannounced return on your investment. You do not gain from the performance of the company. You may be affected by the inability of the company to honor its commitment to you by way of payment. You have a priority claim over the shareholders in case of a company going bankrupt. Country specific laws apply. Some debentures are converted into equity shares after a specific period Note: Please read the terms and conditions carefully.
What Advantages does issue of debentures over equity shares?
Cost is the major advantage. Debentures are to be serviced for the contracted period of time, while equity servicing is perennial.
What are the advantages and disadvantages of shares and debentures?
Shares offer the advantage of potential capital appreciation and dividends, giving investors a stake in the company's growth and profits. However, they come with higher risk, as shareholders may lose their investment if the company underperforms. Debentures provide fixed interest returns and are generally less risky, as they have priority over shares in the event of liquidation. On the downside, debentures typically offer lower returns compared to shares and lack the potential for capital gains.
What is the nature of shares or debentures in Section 44 of Companies Act?
The nature of shares or debentures in section 44 of the Act is movable and transferable in accordance with the article of association.
What are examples of Debentures?
Debentures are a type of debt instrument that companies issue to raise capital, representing a loan made by investors to the issuer. Examples include convertible debentures, which can be converted into equity shares, and secured debentures, which are backed by specific assets of the company as collateral. Other types include unsubordinated debentures, which have priority over other debts in case of liquidation, and zero-coupon debentures, which do not pay interest but are issued at a discount to their face value.
Why are the type of debentures?
Debentures are categorized based on various characteristics, such as security, convertibility, and redemption. Secured debentures are backed by collateral, while unsecured debentures rely on the issuer's creditworthiness. Convertible debentures can be transformed into equity shares, while non-convertible debentures cannot. Additionally, redeemable debentures have a fixed maturity date for repayment, whereas irredeemable debentures do not have a set repayment term.
Four components of capital structure?
the components of capital structure(CS) includes: 1. CS with equity sahres only. 2. CS with equity and preference shares. 3. CS with equity and debentures. 4. CS with equity shares, preference shares and debentures.
What is the advantages and disadvantages of debentures?
You get a fixed preannounced return on your investment. You do not gain from the performance of the company. You may be affected by the inability of the company to honor its commitment to you by way of payment. You have a priority claim over the shareholders in case of a company going bankrupt. Country specific laws apply. Some debentures are converted into equity shares after a specific period Note: Please read the terms and conditions carefully.
What are the advantages of selling debentures?
þ Debentures can be used to raise very long-term finance, (ex. 25 years.)
Merits and demerits of shares and debentures?
Shares represent ownership in a company and can provide dividends and capital appreciation, but they also come with higher risk as their value can fluctuate significantly. Debentures, on the other hand, are debt instruments that offer fixed interest payments and are generally considered safer than shares, but they do not provide ownership rights or the potential for capital gains. While shares can lead to higher returns, they also expose investors to market volatility; debentures offer stability but may have lower overall returns. Ultimately, the choice between shares and debentures depends on an investor's risk tolerance and financial goals.
What are three other names for shares?
Ordinary and preference shares debentures securities also things like equity stock etc.
What is the non convertible redeemeble debentures?
Non-convertible redeemable debentures (NCRDs) are fixed-income securities issued by companies that cannot be converted into equity shares. They provide investors with a fixed rate of interest over a specified period, and the principal amount is redeemable at maturity. Unlike convertible debentures, NCRDs do not offer the option to convert into shares, making them less risky but also potentially less rewarding in terms of capital appreciation. They are typically used by companies to raise funds while maintaining control over ownership.
Under what conditions may the directors of acompany prefer to issue ordinary shares rather than debentures?
ordinary shares are equity whereas debentures are debt - debt is always payable, whereas, equity holders do not always necessarily demand a dividend payment immediately. it would depend on what the company wanted to use the funds for. if the funds were used to fund a project where the returns were not expected for a few years, a company may wish to issue shares rather than debentures as the debentures would have to be paid regardless of when the returns came.
