Debentures

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Questions and Answers

What is the origin of the term 'debenture'?

It is a modern term with no specific etymological origin
It originates from the Greek word 'debtos' meaning 'indebted'
It is derived from the French word 'débiteur' meaning 'debtor'
It comes from the Latin word 'debere' meaning 'to owe' (correct)

What does the term 'debenture' include as per the Companies Act 2013?

Debenture stock, bonds, and any other instrument of a company evidencing a debt (correct)
Only debenture stock and promissory notes
Only debenture stock and bonds
Only debenture stock, bonds, and company shares

What does a debenture generally constitute?

A charge on some property of the company (correct)
An obligation to purchase company products
A right to vote in company decisions
An ownership stake in the company

What is the significance of debentures for companies?

<p>They are one of the principal sources of raising borrowed capital to meet long and medium term financial needs (D)</p> Signup and view all the answers

What does a debenture mean?

<p>A document which either creates or acknowledges debt (D)</p> Signup and view all the answers

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Study Notes

Origin of Debenture

The term "debenture" originates from the Latin word "debere", meaning "to owe".

Definition of Debenture

As per the Companies Act 2013, a debenture is a type of debt instrument issued by a company, acknowledging its debt to the holder.

Constitution of a Debenture

A debenture generally constitutes a written instrument, issued by a company, under its common seal, which acknowledges its debt to the holder.
It includes a promise to repay the debt, along with interest, at a specified rate and time.

Significance of Debentures

Debentures are significant for companies as they provide a way to raise long-term debt capital from the public.
They offer a fixed rate of return to investors, making them a low-risk investment option.