Question

Differentiate between shares and debentures on any two points.

Hint:

Simple memory hook: \textbf{S}hares = \textbf{S}hare of ownership; \textbf{D}ebentures = \textbf{D}ebt.

Answer 1

Point 1: Nature.
\emph{Shares} represent owners’ capital; shareholders are owners. \emph{Debentures} represent loan capital; debenture holders are creditors. Point 2: Return and priority.
\emph{Dividend} on shares is paid only out of profits and is an \emph{appropriation}. \emph{Interest} on debentures is a \emph{charge} against profits—payable even if profits are inadequate; debenture holders have priority over shareholders. Point 3: Repayment.
\emph{Share capital} is normally not repayable during life of the company. \emph{Debentures} carry a fixed maturity (redeemable). Point 4: Security/voice.
Shareholders may vote; debenture holders do not. Debentures may be secured by charge on assets.
Final Answer: \[ \boxed{\text{Shares: ownership & dividend (appropriation). Debentures: loan & interest (charge).}} \] % Quciktip