Question : Assertion-Reason Questions: Chapter - Sources of Business Finance
Questions : Different Sources of Finance
Assertion: Debentures are considered a long-term source of finance.
Reason: Debenture holders become partial owners of the company.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Both assertion and reason are false.
Correct Answer: Assertion is true, but the reason is false.
Solution : The correct answer is (c) Assertion is true, but the reason is false.
The assertion is true. Debentures are indeed considered a long-term source of finance. Debentures are debt instruments issued by a company to raise funds for a long period, usually ranging from a few years to several decades. They represent a form of borrowing for the company and have a fixed maturity date.
The reason is false. Debenture holders are not partial owners of the company. Unlike shareholders who have ownership rights and are partial owners of the company, debenture holders are creditors to the company. They lend money to the company by purchasing debentures and receive fixed interest payments. However, they do not have ownership rights or voting rights in the company's decision-making processes.
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