Question

What do you mean by debenture and share? Explain the difference between debenture and share.

Hint:

Debentures provide fixed returns with low risk, while shares offer variable returns with potential ownership benefits.

Answer 1

Debenture: A debenture is a debt instrument issued by a company to raise funds, promising fixed interest payments and repayment of the principal amount after a specified period. It does not provide ownership rights. Share: A share represents ownership in a company, entitling the shareholder to a share of profits (dividends) and voting rights in decision-making processes. Differences Between Debenture and Share: 1. Nature: - Debentures are a loan taken by the company. - Shares represent ownership in the company. 2. Return: - Debenture holders receive fixed interest. - Shareholders receive variable dividends based on profits. 3. Ownership: - Debenture holders are creditors. - Shareholders are owners of the company. 4. Repayment: - Debentures are repaid after a specific period. - Shares are not repaid during the company's lifetime.