Give one way where debentures score over shares from the point of view of a company .
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KEY TAKEAWAYS-
- Preference, or preferred shares give owners preferential dividend payments and equity rights in liquidation.
- A debenture is a debt security issued by a corporation or government entity that is not secured by an asset.
- Debentures have higher seniority for liquidation repayment than preferred shares, but may pay lower yields.
- The relative level of risk is a primary factor differentiating preferred shares and debentures.
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A debenture is considered a more secure way to invest in a business than purchasing shares, because the company must pay the interest on the debenture before any dividend payments can be made to shareholders. For example, if a company declares bankruptcy, the debenture holders will receive payment before shareholders.
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