Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:

Debentures issued by the company are called:

Options:

Short-term debt

Medium-term debt

Long-term debt

None of these

Correct Answer:

Long-term debt

Explanation:

Debentures are typically considered long-term debt instruments for several reasons:
Maturity Period: Debentures usually have longer maturity periods, often ranging from several years to several decades. This extended repayment period allows companies to spread out their debt obligations over time and align them with the expected life of the assets or projects being financed.
Fixed Interest Rates: Debentures often come with fixed interest rates, meaning that the interest payments remain constant over the life of the debenture. This predictability is particularly suitable for long-term financial planning.