Question : Case Study: LMN Ventures - Financing Innovation and Research
LMN Ventures is a research-driven technology company aiming to innovate and develop cutting-edge products. The company is exploring various sources of business finance to support its research and development endeavors.
Question: Debentures and Financial Instruments
What does the term "redeemable" mean in relation to debentures?
Option 1: The company has the option to buy back the debentures
Option 2: The debentures can be converted into equity shares
Option 3: The company can defer interest payments on debentures
Option 4: The company must pay a fixed interest rate
Correct Answer:
The company has the option to buy back the debentures
Solution : The correct answer is (a) The company has the option to buy back the debentures
When debentures are labeled as "redeemable," it indicates that the company has the option to buy back or repay the debentures at a predetermined date or within a specified period. This gives the company flexibility in managing its debt and financial obligations. Upon redemption, the company typically pays back the principal amount to the debenture holders.
