Question

Debentures represent (a) Fixed capital of the company (b) Permanent capital of the company.

Answer 1

Answer (a) Equity shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital and shareholders are called owners of the company. ... Therefore, debentures represent loan capital of the company.

Answer 2

Complete Question:

Debentures represent (a) Fixed capital of the company (b) Permanent capital of the company (c) Fluctuating capital (d) Loan capital

Answer:

Debentures represent (d) Loan capital of the company.

Debentures:

• A debenture may be a long-term business debt that lets companies finance through funding.
• This is done to avoid issuing shares or equity for a company and mostly to avoid more fraud.
• It is a simple way of borrowing money from investors or funders with a fixed rate of interest charged to it.
• Therefore it is also treated as a liability in the books of accounts.
• The debenture issued by a corporation is an acknowledgment that the corporate has borrowed a particular amount of cash, which it promises to repay at a future date.
• Therefore, debentures represent the loan capital of the corporate.
• The permanent capital of a company includes all the permanent assets while the fixed capital includes all the fixed assets of a company.
• Whereas a fluctuating capital includes the capital whose value keeps on changing in the market.

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