The following are the features of Debentures:
(A) The payment of interest is a charge on profits and is to be paid even if there is no profit.
(B) The debentures, which are issued for a specified period are repayable on the expiry of that period.
(C) If the debentures are generally secured, they carry a fixed or floating charge over the assets of the company.
(D) Debentures can not be converted into shares in any case.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
A debenture is a loan to the company. Its features follow from that: interest is a cost of borrowing, the loan is repaid after its term, and the lender is usually given security over the company’s assets.
(A) The payment of interest is a charge on profits and is to be paid even if there is no profit. Correct. Interest is an expense of borrowing, not a share of profit like a dividend.
(B) The debentures, which are issued for a specified period are repayable on the expiry of that period. Correct. These are redeemable debentures.
(C) If the debentures are generally secured, they carry a fixed or floating charge over the assets of the company. Correct. Secured debentures carry a charge, fixed or floating, on the company’s assets.
(D) Debentures can not be converted into shares in any case. Incorrect. Convertible debentures can be converted into equity shares if the terms of issue so provide.
NCERT (2026-27 edition):
NCERT (2026-27 edition): |
