Debenture certificate. Image credit catawiki.com

Debenture certificate. Image credit catawiki.com

ZIMSEC O Level Commerce Notes: Debentures

Debentures

  • Are loan capital or money borrowed from financial institutions and individuals.
  • Earn interest at a fixed rate.
  • Interest is paid whether or not a company has made profits.
  • Debentures are creditors to the company.
  • A safe form of investment.
  • May be secured against the company’s assets.
  • Can be naked, floating, mortgaged or redeemed debentures.
  • Debenture-holders can force a company into liquidation if interest is not paid.

Types of debentures

Naked debentures

  • issued without any property attached to them.
  • Not a very safe of investment.

Mortgaged Debentures

  • Are secured against company assets e.g. buildings.
  • Is a safe form of investment to the loan lender.
  • In case of liquidation of a company:
  • the attached property will be sold and
  • the proceeds thereof are used to settle the debenture dents.

Redeemable Debentures

  • Are issued for a fixed period of time.
  • Can be bought back by the company after this time lapses.
  • The amount borrowed by the company can be repaid on or before a fixed date.

Irredeemable debentures

  • Cannot be bought back.
  • The amount of money borrowed will only be paid back after the company is liquidated.

To access more topics go to the Commerce Notes page.


Quick NetOne, Econet, And Telecel Airtime Recharge