how loan is different from debenture?
- 5 Answers
- 9006 Views
- State Bank Of India SBI, I also Faced
- E-Mail Answers
Answer Posted / sarvjeet
Both Debentures and Loans are similar for company as regard to fact that both are outside liabilities for a company. But there are some differences. Major which I can recall are as under:
1. Debentures can be raised by companies only while loans can be raised by anyone including individuals.
2. Loans are normally repaid in instalments either monthly, quarterly, half yearly or yearly while debentures are usually repaid in lump sum after a longer period of time which is normally at least 3 years.
3. Debentures have face value and they can be traded in market also while loans do not have any face value and they can not be traded in market.
4. Debentutes have much more features like convertibility, redeemability, management participation etc which is simply lacking in case of most loan agreements.
5. Loans are primarily secured by the asset created by using loan amount. In addition to this they are collaterally secured by some additional asset also and further even by personal guarantees. No such security is attached with debentures except their general lien over the companies assets and their right to liquidate if company fails to redeem debentures on time.
6. Upon liquidation unpaid loans have prior charge on company's assets over unpaid debentures.
All the differences above cannot be generalized in every situation. There are many hybrid products which have characteristics of both loans and debentures. It actually depends upon the nature of contract between both parties.
| Is This Answer Correct ? | 0 Yes | 0 No |
Post New Answer View All Answers
What is the revenue recognition principle?
Define balancing in accounting?
we are a trading company providing devices and some times after sales service. when any defect came we just replace the hardware from another defective device and getting the payment from the customer. how can we account that? is there any tax implications for this?
Explain under what type of account does the unearned revenues fall?
can we adjust margin money paid to bank to open a Bank Guarantee in stock statement while calculating Drawing Power
How can I put Bank Guarantee Receipt entry in Tally ERP9?
What can go wrong if you have a balance sheet with a lot of debt? What can go wrong if there is negative owner's equity? What does a good cash flow statement look like and why?
Do you know what is balance sheet?
Explain me by saying, perpetual or periodic inventory system; what do we mean?
how to reduce the interesting giving to debts ?
What are accounting entities?
1.WHAT IS BRS? 2.WHY DO WE PREPARE BALANCE SHEET? 3.WHAT IS TRIAL BALANCE? 4.WHAT IS VENTURE CAPITAL? 5. WHAT IS DEFFERED REVENUE EXPENDITURE?
Can anybody tell me the steps involved in Budgeting / Forecasting generally..?. Hints would be appreciated highly.
Define depreciation and its types?
In accounting equation what is the treatment of investment in shares??
