Q.An instrument that acknowledges a company's debt, carries a fixed rate of interest payable whether or not the company earns a profit, and is repaid on a stated redemption date, with the holder ranking as a creditor rather than an owner, is a:
(A) Equity Share
(B) Preference Share
(C) Debenture
(D) Rights Issue

A fixed interest obligation payable regardless of profit, with the holder as a creditor, is the defining feature of a debenture.

A Debenture is an acknowledgement of a company's debt, promising a fixed rate of interest at regular intervals and repayment of principal on a stated redemption date, regardless of whether the company has earned a profit. The holder is a creditor, not an owner, and has no voting right, but ranks ahead of all shareholders on winding up.

Option-by-option analysis:

• (A) Incorrect — an equity shareholder receives dividend only if declared out of profit, with no fixed rate and no guaranteed payment. …