What are debentures?
Understand the Problem
The question is asking for an explanation of what debentures are, which likely includes their definition, characteristics, and how they function in the context of finance and investments.
Answer
Debentures are unsecured debt instruments used by companies to raise capital.
A debenture is a type of unsecured debt instrument issued by companies to raise capital. It is not backed by any physical assets or collateral and typically relies on the issuer's creditworthiness.
Answer for screen readers
A debenture is a type of unsecured debt instrument issued by companies to raise capital. It is not backed by any physical assets or collateral and typically relies on the issuer's creditworthiness.
More Information
Debentures are used by companies as a way to raise funds without offering collateral, which means investors rely on the issuer's creditworthiness. They are often used by corporations and governments.
Tips
A common mistake is assuming debentures are always risky because they aren't backed by assets. However, their risk is mitigated by the issuer's reputation and creditworthiness.
Sources
- Debenture Explained, With Types and Features - Investopedia - investopedia.com
- What is a Debenture? - Investopedia - bdc.ca
- Debentures: Meaning, Features, Types, Benefits and Risks - Bajaj Finserv - bajajfinserv.in
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