State the merits of debentures as a source of long term finance
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Advantages of Debentures as source of finance:
Debentures are cheaper source of finance.
The interest rate of debentures is fixed and it should be paid irrespective of profits which increases the commitment and alertness of the firm in utilizing the cash flows effectively.
Debenture holders do not share profit, but they are entitled to certain percent of interest. Thus there will be no dilution in the profit sharing.
The issuance of debentures does not affect the ownership of the company because debenture holders do not have voting rights.
Debentures help in tax savings because the interest paid on them is charged against the profits.
Generally debentures are issued for a long-term. Hence the entity can utilize the funds for a maximum benefit
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