Question : Questions: Different Sources of Finance
Statement 1: Debentures are issued by companies as a form of equity financing.
Statement 2: Debentures provide ownership rights to the holders.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer: Both statements 1 and 2 are false.
Solution : The correct answer is (d) Both statements 1 and 2 are false.
Statement 1 is false. Debentures are not a form of equity financing. Debentures represent a form of debt financing, where the company borrows funds from investors and agrees to repay the principal amount along with interest at a specified date in the future.
Statement 2 is false. Debentures do not provide ownership rights to the holders. Debenture holders are creditors of the company, not owners. They are entitled to receive interest and the repayment of the principal amount, but they do not have ownership stakes or voting rights in the company.
