Read the following facts about shares and debentures. (A) Both shares…

Read the following facts about shares and debentures.

(A) Both shares and debentures can be issued by a company for raising long term funds.

(B) Both shares and debentures can be issued for consideration other than cash.

(D) Debentures can be converted into shares and shares can be converted into debentures

(E) Dividend is paid on shares and debentures both

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A), (B) and (C) Only

(A) Both shares and debentures can be issued by a company for raising long term funds. — True. Shares give owned capital and debentures borrowed capital, both for long periods.

(B) Both shares and debentures can be issued for consideration other than cash. — True. Either can be given to vendors in payment for assets bought.

(C) Both shares and debentures can be issued at premium — True. Either can be issued for more than its face value.

(D) Debentures can be converted into shares and shares can be converted into debentures — False. Only debentures can be converted into shares; shares cannot be converted into debentures.

(E) Dividend is paid on shares and debentures both — False. Shareholders get dividend, but debentureholders get interest.

NCERT (2026-27 edition):
Cash from Financing Activities – “As the name suggests, financing activities relate to long-term funds or capital of an enterprise, e.g., cash proceeds from issue of equity shares, debentures, raising long-term bank loans, repayment of bank loan, etc.”

NCERT (2026-27 edition):
Issue of Shares for Consideration other than Cash – “There are instances where a company enters into an arrangement with the vendors from whom it has purchased assets, whereby the latter agrees to accept, the payment in the form of fully paid shares of the company issued to them. Normally, no such cash is received for issue of shares. These shares can also be issued either at par, at premium or at discount, and the number of shares to be issued will depend upon the price at which the shares are issued and the amount payable to the vendor.”

NCERT (2026-27 edition):
Issue of Debentures for Consideration other than Cash

Extract from the NCERT textbook

NCERT (2026-27 edition):
Return – “… The return on shares is known as dividend while the return on debentures is called interest.”

NCERT (2026-27 edition):
Convertibility – “… Shares cannot be converted into debentures whereas debentures can be converted into shares if the terms of issue so provide, and in that case these are known as convertible debentures.”