Question by saqibsaqib09: The idea of ‘Debenture’?
Can somebody clarify to me the idea of debenture? Preferably utilizing basic examples.
Best answer:
Answer by An Informed Voter!
A debenture is defined as a certificate of agreement of loans which is provided beneath the company’s stamp and carries an undertaking that the debenture holder will get a fixed return (fixed on the basis of interest prices) and the principal quantity anytime the debenture matures.
In finance, a debenture is a extended-term debt instrument utilized by governments and large organizations to acquire funds. It is defined as “a debt secured only by the debtor’s earning power, not by a lien on any specific asset.” It is similar to a bond except the securitization situations are various. A debenture is generally unsecured in the sense that there are no liens or pledges on distinct assets. It is, however, secured by all properties not otherwise pledged. In the case of bankruptcy, debenture holders are deemed general creditors. The advantage of debentures to the issuer is they leave specific assets burden free, and thereby leave them open for subsequent financing. Debentures are usually freely transferable by the debenture holder. Debenture holders have no voting rights and the interest offered to them is a charge against profit.
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