Step-by-step solution provided.

Maharashtra State Board Class 12 (HSC Board) Secretarial Practice (SP) Solutions Chapter 2 Sources of Corporate Finance - Digest Answers | Maharashtra Board Solutions

Maharashtra State Board Class 12 Secretarial Practice Solutions Chapter 2 Sources of Corporate Finance

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1 Maharashtra Board Solution

___________ is the smallest unit in the total share capital of the company. (a) Debenture (b) Bonds (c) Share

Solution & Step-by-Step Answer:

Question 2 Maharashtra Board Solution

The benefit of Depository Receipt is ability to raise capital in ___________ market. (a) national (b) local (c) international

Solution & Step-by-Step Answer:

Question 3 Maharashtra Board Solution

___________ are residual claimants against the income or assets of the company. (a) Bondholders (b) Equity shareholders (c) Debenture holders

Solution & Step-by-Step Answer:

(b) Equity shareholders

Question 4 Maharashtra Board Solution

___________ participate in the management of their company. (a) Preference shareholders (b) Depositors (c) Equity shareholders.

Solution & Step-by-Step Answer:

Question 5 Maharashtra Board Solution

___________ shares are issued free of cost to existing equity shareholders. (a) Bonus (b) Right (c) Equity

Solution & Step-by-Step Answer:

(a) Bonus

Question 6 Maharashtra Board Solution

The holder of preference share has the right to receive ___________ rate of dividend. (a) fixed (b) fluctuating (c) lower

Solution & Step-by-Step Answer:

(a) Fixed

Question 7 Maharashtra Board Solution

Accumulated dividend is paid to ___________ preference shares. (a) redeemable (b) cumulative (c) convertible

Solution & Step-by-Step Answer:

(b) Cumulative

Question 8 Maharashtra Board Solution

The holder of ___________ preference shares has the right to convert their shares into equity shares. (a) cumulative (b) convertible (c) redeemable

Solution & Step-by-Step Answer:

(b) Convertible

Question 9 Maharashtra Board Solution

Debenture holders are ___________ of the company. (a) creditors (b) owners (c) suppliers

Solution & Step-by-Step Answer:

(a) creditors

Question 10 Maharashtra Board Solution

___________ is paid on borrowed capital. (a) Interest (b) Discount (c) Dividend

Solution & Step-by-Step Answer:

(a) Interest

Question 11 Maharashtra Board Solution

Debenture holders get fixed rate of ___________ return on their investment. (a) interest (b) dividend (c) discount

Solution & Step-by-Step Answer:

(a) interest

Question 12 Maharashtra Board Solution

Convertible debentures are converted into ___________ after a specific period. (a) equity shares (b) deposits (c) bonds

Solution & Step-by-Step Answer:

(a) equity shares

Question 13 Maharashtra Board Solution

Retained earnings are ___________ source of financing. (a) internal (b) external (c) additional

Solution & Step-by-Step Answer:

(a) internal

Question 14 Maharashtra Board Solution

The holder of bond is ___________ of the company. (a) secretary (b) owner (c) creditor

Solution & Step-by-Step Answer:

Question 15 Maharashtra Board Solution

Company can accept deposits from public, minimum for ___________ months. (a) six (b) nine (c) twelve

Solution & Step-by-Step Answer:

(a) six

Question 16 Maharashtra Board Solution

Company can accept deposits from public maximum for ___________ months. (a) 12 (b) 24 (c) 36

Solution & Step-by-Step Answer:

Question 17 Maharashtra Board Solution

A depository receipt traded in ___________ is called American Depository Receipt. (a) London (b) Japan (c) USA

Solution & Step-by-Step Answer:

1B. Match the pairs.

Question 1 Maharashtra Board Solution

Solution & Step-by-Step Answer:

Group ‘A’	Group ‘B’
(a) Equity share capital	(1) Venture capital
(b) Debenture Trustees	(2) Trust Deed
(c) Preference shareholders	(3) Cautious investor
(d) Debenture Certificate	(4) Instrument of Debt
(e) Bonus shares	(5) Capitalisation of profit

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1 Maharashtra Board Solution

The real masters of the company.

Solution & Step-by-Step Answer:

Equity shareholders

Question 2 Maharashtra Board Solution

A document of ownership of shares.

Solution & Step-by-Step Answer:

Share certificate

Question 3 Maharashtra Board Solution

The holders of these shares are entitled to participate in surplus profits.

Solution & Step-by-Step Answer:

Participating preference shares

Question 4 Maharashtra Board Solution

A party through whom the company deals with debenture holders.

Solution & Step-by-Step Answer:

Debenture trustees

Question 5 Maharashtra Board Solution

Name the shareholder who participates in the management.

Solution & Step-by-Step Answer:

Equity shareholders

Question 6 Maharashtra Board Solution

The value of a share is written on the share certificate.

Solution & Step-by-Step Answer:

Face value

Question 7 Maharashtra Board Solution

The value of a share is determined by demand and supply forces in the share market.

Solution & Step-by-Step Answer:

Market value

Question 8 Maharashtra Board Solution

The policy of using undistributed profit for the business.

Solution & Step-by-Step Answer:

Retained earnings/ploughing back of profit

Question 9 Maharashtra Board Solution

It is an acknowledgment of a loan issued by the company to the depositor.

Solution & Step-by-Step Answer:

Deposit receipt

Question 10 Maharashtra Board Solution

A dollar-denominated instrument trader in the USA.

Solution & Step-by-Step Answer:

American Depository Receipt

Question 11 Maharashtra Board Solution

The Depository Receipt is traded in a country other than the USA.

Solution & Step-by-Step Answer:

Global depository receipt

Question 12 Maharashtra Board Solution

Money raised by the company from the public for a minimum of 6 months to a maximum of 39 months.

Solution & Step-by-Step Answer:

Public Deposits

Question 13 Maharashtra Board Solution

Credit extended by the suppliers with an intention to increase their sales.

Solution & Step-by-Step Answer:

Trade Credit

Question 14 Maharashtra Board Solution

The credit facility is provided to a company having a current account with the bank.

Solution & Step-by-Step Answer:

Overdraft

1D. State Whether the following statements are True or False.

Question 1 Maharashtra Board Solution

Equity share capital is known as venture capital.

Solution & Step-by-Step Answer:

True

Question 2 Maharashtra Board Solution

Equity shareholders enjoy a fixed rate of dividends.

Solution & Step-by-Step Answer:

False

Question 3 Maharashtra Board Solution

Debenture holders have the right to vote at a general meeting of the company.

Solution & Step-by-Step Answer:

False

Question 4 Maharashtra Board Solution

Equity shareholders are described as ‘shock absorbers’ when a company has a financial crisis.

Solution & Step-by-Step Answer:

True

Question 5 Maharashtra Board Solution

Bondholders are owners of the company.

Solution & Step-by-Step Answer:

True

Question 6 Maharashtra Board Solution

Cash credit is given against hypothecation of goods and security.

Solution & Step-by-Step Answer:

True

Question 7 Maharashtra Board Solution

Trade credit is a major source of long-term finance.

Solution & Step-by-Step Answer:

False

Question 8 Maharashtra Board Solution

Depository bank stores the shares on behalf of the GDR holder.

Solution & Step-by-Step Answer:

True

Question 9 Maharashtra Board Solution

Financial institutions underwrite the issue of securities.

Solution & Step-by-Step Answer:

True

1E. Find the odd one.

Question 1 Maharashtra Board Solution

Debenture, Public Deposit, Retained Earnings

Solution & Step-by-Step Answer:

Retained earnings

Question 2 Maharashtra Board Solution

Face value, Market value, Redemption value

Solution & Step-by-Step Answer:

Redemption value

Question 3 Maharashtra Board Solution

Share certificate, Debenture certificate, ADR

Solution & Step-by-Step Answer:

ADR

Question 4 Maharashtra Board Solution

Trade credit, Overdraft, Cash credit

Solution & Step-by-Step Answer:

Trade credit

1F. Complete the sentences.

Question 1 Maharashtra Board Solution

The finance needed by business organisation is termed as ___________

Solution & Step-by-Step Answer:

Capital

Question 2 Maharashtra Board Solution

The convertible preference shareholders have a right to convert their shares into ___________

Solution & Step-by-Step Answer:

Equity shares

Question 3 Maharashtra Board Solution

Equity shareholders elect their representative Called ___________

Solution & Step-by-Step Answer:

Directors

Question 4 Maharashtra Board Solution

Bonus shares are issued as gift to ___________

Solution & Step-by-Step Answer:

Equity share holders

Question 5 Maharashtra Board Solution

The bondholders are ___________of the company.

Solution & Step-by-Step Answer:

Creditors

Question 6 Maharashtra Board Solution

Depository receipt traded in a country other than USA is called ___________

Solution & Step-by-Step Answer:

Global Depository Receipt

Question 7 Maharashtra Board Solution

First Industrial policy was declared in the year ___________

Solution & Step-by-Step Answer:

1948

Question 8 Maharashtra Board Solution

When goods are delivered by the supplier to the customer on the basis of deferred payment is called as ___________

Solution & Step-by-Step Answer:

Trade credit

1G. Select the correct option from the bracket.

Question 1 Maharashtra Board Solution

(Fluctuating rate of dividend, Preference shares, Interest at fixed rate, Retained earnings, short term loan)

Solution & Step-by-Step Answer:

Group ‘A’

Group ‘B’

(a) Equity shares

(1) Fluctuating rate of dividend

(b) Preference shares

(2) Dividend at a fixed rate

(3) Interest at a fixed rate

(d) Retained earnings

(4) Accumulated corporate profit

(e) Public Deposit

(5) short term loan

1H. Answer in one sentence.

Question 1 Maharashtra Board Solution

What is a share?

Solution & Step-by-Step Answer:

A share is the smallest unit of the share capital of a company.

Question 2 Maharashtra Board Solution

What are equity shares?

Solution & Step-by-Step Answer:

Equity shares are shares that do not preference shares and do not carry priority in receiving dividends nor repayment of capital.

Question 3 Maharashtra Board Solution

What are preference shares?

Solution & Step-by-Step Answer:

Preference shares are shares that have preferential rights with regard to receiving dividends and repayment of capital.

Question 4 Maharashtra Board Solution

What are retained earnings?

Solution & Step-by-Step Answer:

A part of the net profit which is not distributed to shareholders as dividend but retained by the company as reserve fund is retained earnings.

Question 5 Maharashtra Board Solution

What is a debenture?

Solution & Step-by-Step Answer:

It is a document/instrument issued in the form of a debenture certificate under the common seal of the company acknowledging/evidencing the debt.

Question 6 Maharashtra Board Solution

What is a bond?

Solution & Step-by-Step Answer:

A bond is a debt security and a formal contract to repay borrowed money with interest.

Question 7 Maharashtra Board Solution

In which country can ADR be issued?

Solution & Step-by-Step Answer:

ADR (American Depository Receipt) is a depository Receipt that is issued in the USA.

Question 8 Maharashtra Board Solution

In which country can GDR be issued?

Solution & Step-by-Step Answer:

GDR (Global depository receipt) can be issued in countries other than the USA.

Question 9 Maharashtra Board Solution

What are convertible debentures?

Solution & Step-by-Step Answer:

Convertible debentures are debentures that are converted into equity shares after a specific period as specified at the time of issue.

Question 10 Maharashtra Board Solution

What are cumulative preference shares?

Solution & Step-by-Step Answer:

Cumulative preference shares are shares where dividend, if not paid in a year accumulates till it is paid.

1I. Correct the underlined words and rewrite the following sentences.

Question 1 Maharashtra Board Solution

Owned capital is temporary capital.

Solution & Step-by-Step Answer:

Owned capital is permanent capital.

Question 2 Maharashtra Board Solution

Equity shares get dividends at a fixed rate.

Solution & Step-by-Step Answer:

Equity shares get dividends at fluctuating rates.

Question 3 Maharashtra Board Solution

Preference shares get dividends at fluctuating rates.

Solution & Step-by-Step Answer:

Preference shares get dividends at a fixed rate.

Question 4 Maharashtra Board Solution

Retained earnings are an external source of finance.

Solution & Step-by-Step Answer:

Retained earnings are an internal source of finance.

Question 5 Maharashtra Board Solution

The debenture holder is the owner of the company.

Solution & Step-by-Step Answer:

The debenture holder is a creditor of the company.

Question 6 Maharashtra Board Solution

Bond is a source of short-term finance.

Solution & Step-by-Step Answer:

Bond is a source of long-term finance.

Question 7 Maharashtra Board Solution

Depository receipt traded in the USA is called Global Depository Receipt.

Solution & Step-by-Step Answer:

Depository receipt traded in the USA is called American Depository Receipt.

2. Explain the following terms/Concepts.

Question 1 Maharashtra Board Solution

Borrowed capital

Solution & Step-by-Step Answer:

Question 2 Maharashtra Board Solution

Owned capital

Solution & Step-by-Step Answer:

Question 3 Maharashtra Board Solution

Ploughing back of profit

Solution & Step-by-Step Answer:

Question 4 Maharashtra Board Solution

Overdraft

Solution & Step-by-Step Answer:

Question 5 Maharashtra Board Solution

Trade Credit

Solution & Step-by-Step Answer:

3. Study the following case/situation and express your opinion.

1. The Balance sheet of a Donald Company for the year 2018-19 reveals equity share capital of Rs. 25,00,000 and retained earnings of Rs. 50,00,000.

Question (a).
Is the company financially sound?
Answer:
The company is financially sound as it has double the amount as reserves or retained earnings or kept aside profits.

Question (b).
Can the retained earnings be converted into capital?
Answer:
Yes, the retained earnings can be converted into capital by means of capitalisation of reserves.

Question (c).
What type of source retained earning is?
Answer:
Retained earning is self-financing or an internal source of finance.

2. Mr. Satish is a speculator. He desires to take advantage of the growing market for the company’s products and earn handsomely.

Question (a).
According to you, which type of share Mr. Satish will choose to invest in.
Answer:
As Mr. Satish is a speculator, he will choose equity shares to invest in because if there are good earnings/profits, so will be the rate of dividend.

Question (b).
What does he receive as a return on investment?
Answer:
He receives a fluctuating rate of dividends.

Question (C).
State anyone, right he will enjoy as a shareholder.
Answer:
The right to attend the meeting and vote on resolutions can be the right Mr. Satish can exercise as a member.

3. Mr. Rohit, an individual investor, invests his own funds in the securities. He depends on investment income and does not want to take any risk. He is interested in the definite rate of income and safety of the principal.

Question (a).
Name the type of security that Mr. Rohit will opt for.
Answer:
As Mr. Rohit does not want to take risks, he will opt for preference shares which will assure him of steady income and safety of his investment.

Question (b).
What does he receive as a return on his investment?
Answer:
Mr. Rohit will receive dividends in return.

Question (c).
The return on investment which he receives is fixed or fluctuating.
Answer:
The return on his investment will be fixed and not fluctuating.

4. Distinguish between the following.

Question 1 Maharashtra Board Solution

Equity Shares and Preference Shares

Solution & Step-by-Step Answer:

Points	Equity Shares	Preference Shares
1. Meaning	Shares that are not preference shares are called equity shares i.e. these shares do not have the preferential rights for payment of dividends and repayment of capital.	Preferences shares are shares that carry preferential rights as to payment of:Dividend andRepayment of capital.
2. Rate of Dividend	Equity shares are given dividends at a fluctuating rate depending upon the profits of the company.	Preference shareholders get dividends at a fixed rate.
3. Voting Right	Equity shareholders enjoy normal voting rights. They participate in the management of their company.	Preference shareholders do not enjoy normal voting right. They can vote only on matters affecting their interest.
4. Return of Capital	Equity capital can not be returned during the lifetime of the company, (except in case of buyback).	A company can issue redeemable preference shares, which can be repaid during the lifetime of the company.
5. Nature of capital	Equity capital is known as ‘Risk Capital’.	Preference capital is ‘Safe Capital’ with a stable return.
6. Nature of investor	The investors who are ready to take risks to invest in equity shares.	Investors who are cautious about the safety of their investment invest in preference shares.
7. Face Value	The face value of equity shares is generally ₹ 1/- or ₹ 10/- it is relatively low.	The face value of preference shares is relatively higher i.e. ₹ 100/- and so on.
8. Right and bonus issue	Equity shareholder is entitled to get bonus and right issue.	Preference shareholders are not eligible for bonuses and right issues.
9. Capital appreciation	The market value of equity shares increases with the prosperity of the company. It leads to an increase in the value of shares.	The market value of preference shares does not fluctuate, so there is no possibility/cheques of capital appreciation.
10. Risk	Equity shares are subject to higher risk.	Preference shares are subject to less risk.
11. Types	Equity shares are classified into:Equity shares with normal voting rights.Equity shares with differential voting rights.	Preference shares are classified as:Cumulative Preference SharesNon-Cumulative Preference SharesConvertible Preference SharesNon-Convertible Preference SharesRedeemable Preference SharesIrredeemable Preference SharesParticipating Preference SharesNon-Participating Preference Shares

Question 2 Maharashtra Board Solution

Shares and Debentures

Solution & Step-by-Step Answer:

Points	Shares	Debentures
1. Meaning	Share is the smallest unit in the total share capital of the company. It is known as ownership securities.	A debenture is an instrument evidencing debt under the seal of the Company. They are also known as creditor ship securities.
2. Status	A holder of shares is the owner of the company. Hence, share capital is owned capital.	A holder of debenture is the creditor of the company. Hence, Debenture capital is loan capital or borrowed capital.
3. Nature	It is permanent capital. It is not repaid during the lifetime of the company.	It is temporary capital. Generally, it is repaid after a specific period.
4. Voting/Right	Shareholders being owners enjoy normal voting rights in general meetings and can participate in the management of the company.	Debenture holders being creditors, do not have any voting right and can not participate in the management of the company.
5. Return on Investment	Return on shares is called a dividend. Equity shareholders receive dividends at a fluctuating rate whereas preference shareholders receive dividends at a fixed rate.	Return on debenture is called interest. It is fixed at the time of issue. Interest is paid even when a company has no profit.
6. Security	Share capital is unsecured capital. No security is offered to the shareholder.	Debenture capital being loan capital is secured by creating a charge on Company’s property.
7. Time of Issue	Shares are issued in the initial stages of the company formation.	Debentures are issued at a later stage when the company has properties to offer as security.
8. Suitability	Shares are suitable for long-term finance.	Debentures are suitable for medium-term finance.
9. Types	Shares are classified into:Equity sharesPreference	A debenture is classified as:Registered DebenturesBearer DebenturesSecured DebenturesUnsecured DebenturesRedeemable DebenturesIrredeemable DebenturesConvertible DebenturesNon-Convertible Debentures
10. Position on liquidation	On liquidation of a company, shareholders rank last in the list of claimants.	Debenture holders being creditors, rank prior to shareholders for repayment on liquidation of the company.

Question 3 Maharashtra Board Solution

Owned Capital and Borrowed Capital

Solution & Step-by-Step Answer:

Points	Owned Capital	Borrowed Capital
1. Meaning	It is that capital that is contributed by shareholders.	It is that capital that is borrowed from creditors. It is also known as debt capital.
2. Sources	This capital is collected by the issue of equity shares and preference shares, ploughing back of profits (ownership securities).	It is collected by way of the issue of debentures, fixed deposits, loans from banks/financial institutions, etc. (loan, borrowings).
3. Return on Investment	The shareholders get dividends as income on their investment. The rate of dividend is fluctuating, in the case of equity shares but is fixed in the case of preference shares.	The debt capital holders get interested as income on their investment. Interest is paid at a fixed rate.
4. Status	The shareholders are owners of the company.	The debt holders are creditors of the company.
5. Voting right	The equity shareholders enjoy normal voting right at the general meetings.	The creditors do not enjoy voting rights at the general meeting.
6. Repayment of Capital Redemption	The shareholders do not enjoy priority over creditors. They are eligible for repayment of Capital only after making payment to creditors at the time of windings up of the company.	The creditors get priority over the shareholders in case of return of principal amount at the time of winding up of the company.
7. Charge on assets	The shareholders do not have any charge on the assets of the company.	The secured debenture holders have a change on the assets of the company.

5. Answer in brief:

Question 1 Maharashtra Board Solution

What is a public deposit?

Solution & Step-by-Step Answer:

Advantages of deposits to the company

Question 2 Maharashtra Board Solution

What are Global Depository Receipt and American Depository Receipt?

Solution & Step-by-Step Answer:

Question 3 Maharashtra Board Solution

What is Trade Credit?

Solution & Step-by-Step Answer:

Advantages of Trade Credit:

Question 4 Maharashtra Board Solution

What are the schemes for disbursement of credit by banks?

Solution & Step-by-Step Answer:

Meaning: Banks play an important role in terms of providing finance to the companies. They provide short-term finance for working capital, in the form of bank and trade credits.

The innovative schemes by banks for disbursement of credit are as follows:
(i) Overdraft:

(ii) Cash Credit:

(iii) Cash Loans:

(iv) Discounting bills of exchange:

Question 5 Maharashtra Board Solution

State the features of bonds.

Solution & Step-by-Step Answer:

Definition: According to Webster Dictionary, “a bond is an interest bearing certificate issued by a Government or business firm promising to pay the holder a specific sum at a specified date”. A bond is thus-

Features:
(i) Nature of finance:

(ii) Status of investor:

(iii) Return on bonds:

(iv) Repayment:

6. Justify the following statements:

Question 1 Maharashtra Board Solution

Equity shareholders are real owners and controllers of the company.

Solution & Step-by-Step Answer:

Question 2 Maharashtra Board Solution

Preference Shares do not carry normal voting rights.

Solution & Step-by-Step Answer:

Question 3 Maharashtra Board Solution

The debenture is secured by a charge on assets of the company.

Solution & Step-by-Step Answer:

Question 4 Maharashtra Board Solution

Retained earnings are the simple and cheapest method of raising finance.

Solution & Step-by-Step Answer:

Question 5 Maharashtra Board Solution

Public deposit is a good source of short-term financing.

Solution & Step-by-Step Answer:

Question 6 Maharashtra Board Solution

The bondholder is a creditor of the company.

Solution & Step-by-Step Answer:

Question 7 Maharashtra Board Solution

Trade credit is not a cash loan.

Solution & Step-by-Step Answer:

Question 8 Maharashtra Board Solution

Different investors have different preferences.

Solution & Step-by-Step Answer:

Question 9 Maharashtra Board Solution

Equity Capital is risk capital.

Solution & Step-by-Step Answer:

7. Answer the following questions.

Question 1 Maharashtra Board Solution

What are a share and state its features?

Solution & Step-by-Step Answer:

Features of shares:
(i) Meaning:

(ii) Ownership:

(iii) Distinctive number:

(iv) Evidence of title:

(v) Value of a share:

(vi) Rights:

(vii) Income:

(viii) Transferability:

(ix) Property of shareholder:

(x) Kinds of shares:

Question 2 Maharashtra Board Solution

What is an equity share? Explain its features.

Solution & Step-by-Step Answer:

Features of equity shares:
(i) Permanent Capital:

(ii) Fluctuating dividend:

(iii) Rights:

(iv) No preferential right:

(v) Controlling power:

(vi) Risk:

(vii) Residual claimants:

(viii) No charge on assets:

(ix) Bonus issue:

(x) Rights issue:

(xi) Face value:

(xii) Market value:

(xiii) Capital Appreciation:

Question 3 Maharashtra Board Solution

Define preference shares/What are preference shares? What are the different types of preference shares?

Solution & Step-by-Step Answer:

(i) Cumulative Preference Shares:

(ii) Non-Cumulative Preference Shares:

(iii) Participating Preference Shares:

(iv) Non-Participating Preference Shares:

(v) Convertible Preference Shares:

(vi) Non-Convertible Preference Shares:

(vii) Redeemable Preference Shares:

(viii) Irredeemable Preference Shares:

Question 4 Maharashtra Board Solution

What are preference shares? State its features.

Solution & Step-by-Step Answer:

Features of preference shares:
(i) Preference for dividend:

(ii) Prior repayment of capital:

(iii) Fixed return:

(iv) Nature of capital:

(v) Market value:

(vi) Voting right:

(vii) Risk:

(viii) Face value:

(ix) Right or Bonus issue:

(x) Nature of investor:

Question 5 Maharashtra Board Solution

What is Debenture/Define Debenture. Discuss the different types of Debentures.

Solution & Step-by-Step Answer:

Definitions:
Topham defines: “A debenture is a document given by a company as evidence of debt to the holder, usually arising out of the loan and most commonly secured by the charge.”

They are as follows:
(i) Secured Debentures:

(ii) Unsecured Debentures:

(iii) Registered Debentures:

(iv) Bearer Debentures:

(v) Redeemable Debentures:

(vi) Irredeemable Debentures:

(vii) Convertible Debentures:

(viii) Non-Convertible Debentures:

Question 6 Maharashtra Board Solution

Define Debenture/What is a debenture? Explain the features of debenture?

Solution & Step-by-Step Answer:

Definitions:
Topham defines: “A debenture is a document given by a company as evidence of debt to the holder, usually arising out of the loan and most commonly secured by the charge.”
A debenture is evidence of indebtedness.

Features of Debenture:
(i) Written Promise:

(ii) Face Value:

(iii) Time of payment:

(iv) Priority of Payment:

(v) Assurance of repayment:

(vi) Terms of issue and redemption of Debenture:

(vii) Authority to issue:
Board of Directors has the authority/power to issue debenture as per Companies Act 2013 Section 179(3).

(viii) Interest:

(ix) Parties to Debenture:

(x) Status of debenture holder:

(xi) No Voting Right:

(xii) Security: