Loan Capital: Debentures - SS2 Accounting Past Questions and Answers - page 1
What is a debenture?
A type of equity instrument issued by a company
A type of debt instrument issued by a company
A type of insurance policy issued by a company
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What is the fixed interest rate for debentures?
The interest rate that changes throughout the term of the debenture
The interest rate that is determined at the time of issuance and remains constant throughout the term of the debenture
The interest rate that is determined by the investor
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What is the maturity date for debentures?
The date on which the issuer must repay the principal amount of the debenture to the investor
The date on which the investor must repay the principal amount of the debenture to the issuer
The date on which the interest rate for the debenture changes
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What is the difference between secured and unsecured debentures?
Secured debentures are backed by collateral, while unsecured debentures are not
Secured debentures have a higher interest rate than unsecured debentures
Secured debentures can be converted into equity, while unsecured debentures cannot
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What is the priority in case of bankruptcy for debenture holders?
Debenture holders have priority over shareholders to recoup their investment
Shareholders have priority over debenture holders to recoup their investment
Debenture holders and shareholders have equal priority in case of bankruptcy
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What is the main difference between a debenture and a share?
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Discuss “priority in case of bankruptcy” as a feature of debentures.
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