Question : Which of the following statements is false?
Option 1: A Company Can issue Convertible debenture
Option 2: Debenture can not be secured
Option 3: Company can issue redeemable debenture
Option 4: Debenture have no right to participate in profit over and above their fixed interest
Correct Answer: Debenture can not be secured
Solution : A secured debenture is one that is supported by collateral. In other words, the lender gets a sort of insurance against not getting paid back on the loan. If the borrower is in default and unable to repay the loan, the lender may redeem the debt by taking possession of the borrower's assets.
Hence the correct answer is option 2.
Question : Which of the following statements is true?
Option 1: The debenture is a borrowing of the company.
Option 2: Debenture is normally secured by way of charge on the assets of the company.
Option 3: Interest on Debentures is a charge against profit.
Option 4: All of the above
Option 1: Debenture is debt of the company. Therefore, a debenture holder is a lender.
Option 2: Debenture holder gets interest at the stated rate whether the company earns profit or not.
Option 3: Debentures cannot be issued at discount.
Option 4: Debentures can be converted into shares.
Option 1: Interest on debentures is calculated at fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue.
Option 2: Rate of interest is prefixed to the debenture, is payable even if the company incurs a loss.
Option 3: Interest on debentures is a charge against profit.
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