In the previous post we used words like Debentures and Bonds. Let us see what they are..
Companies issue shares and the shares represent part of ownership. A share holder is literally one of the owners of a company.
Debentures and Bonds are also issued by companies and governments who want to raise capital. But people who buy debentures and Bonds does not enjoy ownership of the company like the share holders. They are the lenders who give funds to the company. Debentures and Bonds have a face value. For example, You buy 10 debentures at a face value of $50, the you lend the company $500. the In turn company promises them to pay interests on the debenture amount. Since Debenture can also be traded, we can call it a Security.
So Debentures will fetch you interest earnings and at maturity you will get the face value of the debenture.
It is considered as risk free investment when compared with shares. These debentures are secured against the companies assets. So if a company defaults the assets will be sold to settle the debentures.
Companies issue shares and the shares represent part of ownership. A share holder is literally one of the owners of a company.
Debentures and Bonds are also issued by companies and governments who want to raise capital. But people who buy debentures and Bonds does not enjoy ownership of the company like the share holders. They are the lenders who give funds to the company. Debentures and Bonds have a face value. For example, You buy 10 debentures at a face value of $50, the you lend the company $500. the In turn company promises them to pay interests on the debenture amount. Since Debenture can also be traded, we can call it a Security.
So Debentures will fetch you interest earnings and at maturity you will get the face value of the debenture.
It is considered as risk free investment when compared with shares. These debentures are secured against the companies assets. So if a company defaults the assets will be sold to settle the debentures.
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