Debentures are loan certificates issued by a company to raise long-term funds from the public without increasing share capital. They mature after a fixed period, at which point the company must repay the principal amount. Debentures offer a fixed rate of interest but do not provide control rights or claims on company assets/income to debenture holders like shareholders. While debentures provide a stable source of low-cost financing, over-reliance on them increases financial risk for companies, especially during times of economic depression when profit declines make interest payments a burden.

1. BY - HAMIDUZZOHA

2. If a company need funds for extension and
development purpose without increasing its share
capital. it can borrow from the general public by
issuing certificate for a Fixed period of time and at a
fixed rate of interest such a loan certificate is called
a debenture. Debentures are offered to the public for
subscription in the same way as for issuing of equity
share .

3. Maturity
Claim on
income
Claim on
assets
Right to
control
Call feature

4.  Maturity – Although Debentures provide
long-term funds to a company ,they mature
after specific period. Generally , the
Debentures are to be repaid at a definite
time as stipulated in the issue. The
company must pay back the principal
amount on these debenture on the given
date otherwise the Debenture holders may
force winding up of the company as
creditors.

9.  Fixed and stable source of income- Issue of
debenture does not result in dilution of interest of
equity share holder as they do not have right either to
vote or take part in the management of the company
 Tax deductible expense- Interest on Debenture is a
tax Deductible Expenditure and thus it saves income
tax
 Low rate of interest- Cost of debenture is relatively
lower then preference share and equity share
 Issue of debenture is advantageous during times of
inflation

10. payment of interest on debenture is obligatory
and hence it becomes burden If the company
incurs loss
 Debenture are issued to trade on equity but to
much dependence on debentures increases the
financial risk of the company
 During depression, the profit of the company
goes on declining and it becomes difficult for
the company to pay interest.

11. Type of
Debenture
Security
Point of view
Convertible
Point of view
Permanence
Point of view
Record point
Of view
Naked/Simpl
e
Mortgage
Redeemable
Irredeemable
Bearer
Registered
Convertible
Non-
convertible