Debentures Meaning, Types & Examples.pdf

The debentures meaning in Latin word “debere” means to take a loan or borrow money. Debentures refer to long-term borrowings. The company which are issuing the debentures will make the interest payments on the debt before paying the share dividends to the shareholders. Debentures are similar to unsecured loans where at the time of default, the investor does not have rights in the assets of the company.

1. Debentures Meaning, Types &
Examples

2. The debentures meaning in Latin word “debere” means to take a loan or
borrow money. Debentures refer to long-term borrowings. The company
which are issuing the debentures will make the interest payments on the
debt before paying the share dividends to the shareholders. Debentures
are similar to unsecured loans where at the time of default, the investor
does not have rights in the assets of the company.


Debentures represent that the repayment depends solely on the
creditworthiness and financial strength of the issuing company.
Companies may also issue them security. At the time of liquidation, the
company has to pay the creditors. Investors should first verify their credit
ratings before they invest in these instruments.

3. Debentures Meaning Long-Term Debt Instrument
Debentures refer to long-term debt instruments issued by a government or
company to meet its financial requirements. Investors are paid an interest
amount for being a creditor of the company. These are unsecured long-term
borrowings from the public with a lengthy tenure, usually exceeding ten years.
The companies can use debentures for raising capital of the company because
they have lower interest rates and shorter holding periods. These kinds of
instruments are more attractive. Therefore, they can be more appealing than
other long-term debt instruments. Debentures are offered to the public issue at
large, just as equity shares are issued.