AIOU SOLVED ASSIGNMENT 1 CODE 444 AUTUMN 2015
Q 02:
Ans:-
DEPENTURE – DEFINITION:-
Debenture is a type of debt instrument that is not
secured by physical assets or collateral. Debentures are backed only the
general creditworthiness and reputation of the issuer. Both corporations and
governments frequently issue this type of bond in order to secure capital. Like
other types of bonds, debentures are documented in an indenture.
DIFFERENCE BETWEEN DEBENTURES AND SHARES OF JOINT STOCK COMPANY
The following are the major differences between shares of
joint stock company and debentures:-
1.
The holder of shares is known as shareholder
while the holder of debentures is known as debenture holder.
2.
Share is the capital of the company but
debenture is the debt of the company.
3.
The shares represent ownership of the shareholders
in the company. On the other hand, debentures represent indebtedness of the
company.
4.
The income earned on shares is dividend, but the
income earned on debentures is interest.
5.
In the event of winding up debentures get
priority of repayment over shares.
6.
Shares cannot be converted as opposed to
debentures are convertible.
7.
There is no security charge created for payment
of shares. Conversely, security charge is created for the payment of
debentures.
8.
Trust deed is not executed in case of shares
whereas trust deed is executed when the debentures are issued to public.
9.
Unlike debenture holders, shareholders have
voting rights.
10.
Shares are issued at discount subject to some
legal compliance. Debentures can be issued at discount without any legal
compliance.
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