Distinguish between the following: Shareholder and Debenture Holder

Question 34 of 35

Q. Distinguish between the following: Shareholder and Debenture Holder

Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2020Subjective· 4mImportance★★★★★

97% · 34/35 Questions

🔒 Locked · start free trial →

You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.

Start your 14-day free trial to unlock the full solution →

A shareholder owns the company and shares its profit and risk; a debenture holder only lends to the company and earns fixed interest.

Point	Shareholder	Debenture Holder
Status	Owner / member of the company	Creditor / lender to the company
Return	Receives dividend, which varies with profit	Receives interest at a fixed rate
Certainty of return	Dividend paid only if there is profit	Interest paid whether or not there is profit
Voting rights	Has voting rights in company matters	Has no normal voting rights
Security	Capital is not secured; bears risk	Secured debentures are backed by a charge on assets

Start your 14-day free trial to unlock the full solution →

Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2023Set ANNUAL4 marks

Q. Distinguish between the following: Shares and Debentures

›Reveal solution

A share is a unit of ownership capital and its holder is a member/owner; a debenture is an acknowledgement of debt and its holder is a creditor. This basic difference in status drives every other difference between the two.

When a company needs long-term finance it can raise it as owned capital (shares) or borrowed capital (debentures). Both are important sources, but they place the investor in very different positions.

Shares divide the capital of a company into units of ownership. A person holding shares becomes a member and part-owner of the company.

Debentures are written instruments acknowledging a loan taken by the company. A person holding debentures becomes a lender (creditor) to the company.

Basis	Shares	Debentures
Meaning	Unit of ownership capital	Acknowledgement of a loan (borrowed capital)
Status of holder	Owner / member of the company	Creditor of the company
Return	Dividend, which varies with profit	Interest at a fixed rate
Certainty of return	Not fixed; paid only if there are profits	Fixed; payable even if there is no profit
Voting rights	Equity shareholders have voting rights	No voting rights

Start your 14-day free trial to see the full solution →

CBSE 2020Set ANNUAL4 marks

Q. Distinguish between the following: Shareholder and Debenture Holder

›Reveal solution

A shareholder owns the company and shares its profit and risk; a debenture holder only lends to the company and earns fixed interest.

Point	Shareholder	Debenture Holder
Status	Owner / member of the company	Creditor / lender to the company
Return	Receives dividend, which varies with profit	Receives interest at a fixed rate
Certainty of return	Dividend paid only if there is profit	Interest paid whether or not there is profit
Voting rights	Has voting rights in company matters	Has no normal voting rights
Security	Capital is not secured; bears risk	Secured debentures are backed by a charge on assets

Start your 14-day free trial to see the full solution →

←Previous questionQ23 — Discuss the different types of debentures.→Next questionQ25 — State with reasons whether the following statement is True or False: B…

Q.Distinguish between the following:
Shareholder and Debenture Holder

Concept understanding — Distinction: Shares and Debentures

Q.Distinguish between the following: Shareholder and Debenture Holder

🎓Unlock everything free for 14 days

Q.Distinguish between the following:
Shareholder and Debenture Holder

Unlock everything free for 14 days