Question : Questions : Equity Shares and Preference Shares
Statement 1: Debentures carry a fixed interest rate and are issued to raise funds.
Statement 2: Debenture holders have no claim over the company's assets.
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:
Statement 1 is true, and statement 2 is false.
Solution : The correct answer is (a) Statement 1 is true, and statement 2 is false.
Statement 1 is true. Debentures typically carry a fixed interest rate and are indeed issued by companies to raise funds. Debenture holders receive regular interest payments at the specified rate.
Statement 2 is false. Debenture holders do have a claim over the company's assets. In the event of a company's liquidation or winding up, debenture holders are among the creditors who have a claim on the company's assets to recover their investment. The claim of debenture holders is usually subordinate to that of secured creditors, but they still have a claim.
