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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.

Posted by Natasha Mishra 4 years, 1 month ago

CBSE > Class 11 > Business Studies

1 answers

Gaurav Seth 4 years, 1 month ago

<th>SHARES</th> <th>DEBENTURES</th>

Share capital forms a part of the total capital of the company and shareholders are treated as owners of the company.	Debentures are defined as a debt of the company and debenture holders are creditors to the company.
Rate of Return
The dividend rate on shares fully depends upon the profits that are obtained by the company.	The interest rate on debentures is fixed at the beginning of the issue of the debentures.
Payment Condition
Shareholders are paid after the debenture holders are paid interest.	Debenture holders are paid the interest before the shareholders are paid.
Payment Obligation
Shareholders are paid dividend out of profits and if the company is in losses they don't get dividend.	Debenture holders are creditors and get interest compulsorily irrespective of the company makes a profit or not.
Winding up of Company
The shareholders of the company may lose a part or full of their capital when the company is wound up.	The company should pay back the investment of debenture holders invariably when the company is wound up.
Voting Rights
Shareholders are given right to attend and vote at the meetings of the shareholders conducted by the company.	Debenture holders do not have any right to vote in the company's meetings.
Risk Associated
Investment in shares of the company is considered as risky because shareholders are of residual interest in the company.	Debentures are considered as a good investment idea because it has a right to get the investment amount back.
Redeemable Nature
Shares are not redeemable except in the case of redeemable preference shares.	Debentures are redeemable after the completion of the maturity period.
Security
The shareholders have no security for the investment they made on shares.	Debentures are very well secured because the debenture holders have a charge on assets of the company.
Maturity Period
A shareholder of the Shares is not paid back by the company because shares have no maturity period.	Debenture holders have to be paid back at the end of a maturity period of the debenture.

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