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
Correct Answer: All of the above
Solution : Answer = All of the above
A debenture is issued by a company to borrow money. A debenture is the acknowledgement of debt given under the seal of the company and containing a contract for the repayment of the principal sum at a specified date and the payment of interest at a fixed rate percent until the principal sum is re-paid.
Option 1: Interest on debentures is payable only when the Company earns profits.
Option 2: Debentures secured by a charge on assets of the company entitle the debenture holders to take possession of those assets even if their payment is made as per terms.
Option 3: Debentures secured by a floating charge on the assets of the company entitle their holders to receive their payment in priority to first charge holders from the sale of such assets.
Option 4: Deep Discount Bonds are issued at a price substantially below the maturity value.
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.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile