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 a form of debt financing, not equity financing. When a company issues debentures, it is borrowing money from investors and agreeing to pay it back with interest at a later date.
Statement 2 is false. Debentures do not provide ownership rights to the holders. Debenture holders are creditors of the company and have a claim on the company's assets and earnings, but they do not have ownership stakes or voting rights in the company.
