Best Advantages and Disadvantages of Debentures

The Best Advantages of Debentures are as follows:

1) The shareholders of the debentures are free to a fixed rate of interest. It can be presented as “5 percent Debenture”.

2) Debentures are for those who want a secure and safe profits as they are certain payments with high interest rates.

3) They have given priority over other unsafe creditors when it comes to debt repayment.

The Major Disadvantages of Debentures are:

1) Unlike ordinary shares, debenture shareholders are not considered the owners of the company. They are very long term debt capital and holders will have no correct to vote at the yearly meeting.

2) Debentures are safe and secure than stocks, but will guide to a lower rate of theoretical return.

3) It is a type of debt tool which is not secured by collateral. In case of bankruptcy, the bondholders are given priority over the debenture holders.

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