Meaning And Types of Shares, Debenture And Other Securities - SS1 Economics Lesson Note
Shares, debentures, and other securities are financial instruments that companies use to raise capital. These instruments represent ownership or a promise of repayment to the investors.
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Shares: Shares represent ownership in a company. When a company issues shares, they sell a portion of the ownership of the company to the public. There are two main types of shares - common shares and preferred shares. Common shares give the shareholder voting rights, and they are entitled to a share of the company's profits through dividends. Preferred shares, on the other hand, give the shareholder priority over common shareholders in receiving dividends and in the event of the company's liquidation.
Debentures: Debentures are a type of debt instrument that companies use to raise capital. When a company issues debentures, they are borrowing money from investors, and they promise to repay the principal and interest at a specified time in the future. Debenture holders do not have any ownership rights in the company.
Other securities: Other securities include bonds, options, warrants, and futures contracts. Bonds are similar to debentures in that they represent a promise to repay borrowed money, but they are usually issued by governments or large corporations. Options, warrants, and futures contracts are financial derivatives that allow investors to speculate on the future price movements of an underlying asset.