Most companies raise long-term funds through debentures. Identify incorrect statements regarding debentures.
(A) Debenture holders enjoy voting rights.
(B) A company may issue different kinds of debentures, like Secured Debentures, Unsecured Debentures, Redeemable Debentures, Irredeemable Debentures, Convertible Debentures, Non-convertible Debentures.
(C) A debenture is a part of the owned capital.
(D) The return on Debenture is known as dividend.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (C) and (D) only
A share makes its holder an owner of the company; a debenture makes its holder a lender. Each statement is judged on that difference.
(A) Debenture holders enjoy voting rights. Incorrect. Debentureholders are creditors, so they do not normally have any voting right; shareholders do.
(B) A company may issue different kinds of debentures, like Secured Debentures, Unsecured Debentures, Redeemable Debentures, Irredeemable Debentures, Convertible Debentures, Non-convertible Debentures. Correct. Debentures are classified by security, by redemption and by convertibility, which gives all these kinds.
(C) A debenture is a part of the owned capital. Incorrect. A debenture is an acknowledgement of debt, so it is part of the borrowed capital; a share is part of the owned capital.
(D) The return on Debenture is known as dividend. Incorrect. The return on a debenture is interest, a charge on profits paid even in a year of loss; dividend is the return on shares.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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