Difference between Shares and Debentures
In the stock market, shares and debentures are familiar words when it comes to investment. In business, debt and equity are the two significant methods by which they raise money for the company’s expansion and growth.
Whenever a firm chooses equity to boost funds, the shares of the company are issued to the public, and whoever buys shares gets an opportunity to be part of the company. The second is debt a company receives a loan from the public and also agrees to pay the interest regularly. There, the debenture is issued to the public and whoever buys it is known as creditors.
Here, shares are defined as the share capital of an organization. It gives the shareholder the right to hold a specified amount of the share capital of the firm. Similarly, a debenture is a great financial tool that shows the debt of a business to the outside party/public and gives a fixed interest rate. Today, most of the people invest in share or debenture intending to get back better; therefore, it is essential to understand the two securities of investments.
In this article, we will understand the meaning and difference between shares and debentures.
Meaning of Debentures
A debenture is a debt tool used by a company that supports long term loans. Here, the fund is a borrowed capital, which makes the holder of debenture a creditor of the business. The debentures are both redeemable and unredeemable, freely transferable with a fixed interest rate. It is unsecured and sustained only by the issuer’s credibility.
Unlike shareholders, the debenture holders who are the creditor of the company do not hold any voting rights. The debentures are of following types:
Secured Debentures
Convertible Debentures
Unsecured Debentures
Registered Debentures
Non-convertible Debentures
Bearer DebenturesMeaning of Shares
A tiny part of a firm’s capital is identified as shares and is usually sold in the stock market to raise funds for a business. The price at which the investor buys the share is known as share price. The shareholders are qualified to receive the dividend as mentioned by an organisation because they are the owner of a portion of share iv the company.
Meaning of Shares
A tiny part of a firm’s capital is identified as shares and is usually sold in the stock market to raise funds for a business. The price at which the investor buys the share is known as share price. The shareholders are qualified to receive the dividend as mentioned by an organisation because they are the owner of a portion of share iv the company.
The shares are transferrable/movable and are broadly categorized into two different sections.
Equity share
Preference share
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