Question

State five points of difference between share and debenture

Answer 1

1.The shares are the owned funds of the company while the debentures are the borrowed funds of the company.

2.Shares represent the capital of the company while Debentures represent the debt of the company.

3.The holder of shares is known as shareholder while the holder of debentures is known as debenture holder.

4.The holders of shares have voting rights while the holders of debentures do not have any voting rights.

5.Shareholders get the dividend while Debenture holders get the interest.

Answer 2

ON THE BASIS OF :

1) Capital vs Debt

Amount raised by issue of shares represents the capital of the company.

Amount raised by the issue of debentures represents the indebtedness of the company.

2) Form of Return

The return paid to shareholders is termed as dividend

The return paid to debenture holder is called as interest.

3) Quantum of Return :

Dividend on shares is an appropriation of profits.

Interest on debentures is charge on profits

4) Returns vis a vis Profits :

The amount of dividend varies with the quantum of profit.

The amount payable as interest is fixed irrespective of quantum of profits.

5) Issue at discount :

Issue of shares at a discount is prohibited

There is no restriction or condition for issue of debentures at discount.