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Make a comparative evaluation of shares …

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Make a comparative evaluation of shares and debentures as source of business finance?
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Gaurav Seth 4 years, 1 month ago

<th>BASIS FOR COMPARISON</th> <th>SHARES</th> <th>DEBENTURES</th>
Meaning The shares are the owned funds of the company. The debentures are the borrowed funds of the company.
What is it? Shares represent the capital of the company. Debentures represent the debt of the company.
Holder The holder of shares is known as shareholder. The holder of debentures is known as debenture holder.
Status of Holders Owners Creditors
Form of Return Shareholders get the dividend. Debenture holders get the interest.
Payment of return Dividend can be paid to shareholders only out of profits. Interest can be paid to debenture holders even if there is no profit.
Allowable deduction Dividend is an appropriation of profit and so it is not allowed as deduction. Interest is a business expense and so it is allowed as deduction from profit.
Security for payment No Yes
Voting Rights The holders of shares have voting rights. The holders of debentures do not have any voting rights.
Conversion Shares can never be converted into debentures. Debentures can be converted into shares.
Repayment in the event of winding up Shares are repaid after the payment of all the liabilities. Debentures get priority over shares, and so they are repaid before shares.
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