Question : What is the main advantage of debentures for a company?
Option 1: Lower interest payments
Option 2: No obligation to repay
Option 3: No dilution of ownership
Option 4: Increased voting rights
Correct Answer:
Lower interest payments
Solution : The correct answer is (a) Lower interest payments
The main advantage of debentures for a company is lower interest payments compared to other forms of debt financing. Debentures often offer a lower interest rate compared to bank loans or other forms of borrowing, which can result in lower interest expenses for the issuing company. Debentures typically have a fixed interest rate specified at the time of issuance. This fixed interest rate remains constant over the debenture's tenure, providing stability and predictability in interest payments for the company. Lower interest payments can result in improved cash flow and profitability for the company.
