Question 14 of 17
Q.Differentiate between a share and a debenture.
Yanam BieapBIEAP AP Intermediate (1st Year) Commerce Board 2020Subjective· 5mImportance★★★★★est
82% · 14/17 Questions
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Start your 14-day free trial to unlock the full solution →A share is a part of the owned capital of a company, making its holder a member/owner who earns a fluctuating dividend and carries voting rights. A debenture is a part of the borrowed capital, making its holder a creditor who earns fixed interest, carries no voting rights, is usually secured, and ranks ahead of shareholders for repayment.
Difference between a Share and a Debenture
| Basis | Share | Debenture |
|---|---|---|
| Meaning | A unit of owned capital of the company | An acknowledgement of a loan (borrowed capital) |
| Status of holder | Owner / member of the company | Creditor of the company |
| Return | Dividend — variable, paid only out of profits | Interest — fixed, paid whether or not there is profit |
| Voting rights | Shareholders (equity) have voting rights | Debenture-holders have no voting rights |
| Security | Shares are not secured | Debentures are usually secured by a charge on assets |
| Repayment on winding up | Paid last, after all creditors | Paid before shareholders |
| Convertibility | Shares cannot be converted into debentures | Debentures can be convertible into shares |
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