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Fundamentals of Financial Management, Third Edition by Vyuptakesh Sharan

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15.3 DEBENTURES

15.3.1 Significance of Debentures

Debentures are no less significant than the shares. They represent borrowed capital. The holders debentures are known as the creditors of the company. In fact, a debenture is a written instrument through which a company acknowledges a debt due to the holder and promises to repay it after a specified period of time along with the interest payable at regular intervals. It may be mentioned that the terms, bonds and debentures are used synonymously, although, in the USA, bonds refer to debt having lien on specific asset and debentures are unsecured bonds.

Debentures are popular the world over. The reason being that the effective cost of debentures is lower. It is for this reason that share capital ...

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