What is debenture?
Understand the Problem
The question is asking for the definition and explanation of the term 'debenture', which is a type of debt instrument used by companies to borrow money, typically with a promise to repay with interest.
Answer
A debenture is an unsecured debt instrument used by corporations or governments, relying on creditworthiness instead of collateral.
A debenture is an unsecured debt instrument issued by corporations or governments. It does not rely on collateral and is supported by the issuer's creditworthiness and reputation.
Answer for screen readers
A debenture is an unsecured debt instrument issued by corporations or governments. It does not rely on collateral and is supported by the issuer's creditworthiness and reputation.
More Information
Debentures are popular because they allow entities to raise capital without securing it with specific assets. This makes them a flexible financial instrument. However, because they are unsecured, they come with higher risk, which is often compensated by a higher interest rate.
Sources
- Debenture Explained, With Types and Features - Investopedia - investopedia.com
- Debentures: Meaning, Features, Types, Benefits and Risks - bajajfinserv.in
- What is a debenture? | BDC.ca - bdc.ca
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