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Types of Debentures

Types of Debentures:

Debentures may be divided into the following major types:

1. Unsecured debentures: Unsecured debentures are not given any security on assets of the company. It is also called simple or naked debentures. This type of debentures are treaded as unsecured creditors at the time of winding up of the company.

2. Secured debentures: Secured debentures are given security on assets of the company. It is also called as mortgaged debentures because these debentures are given against any mortgage of the assets of the company.

3. Redeemable debentures: These debentures are to be redeemed on the expiry of a certain period. The interest is paid periodically and the initial investment is returned after the fixed maturity period.

Types of Debentures
[Post Image Courtesy of CoolDesign at FreeDigitalPhotos.net]

4. Irredeemable debentures: These kind of debentures cannot be redeemable during the life time of the business concern.

5. Convertible debentures: Convertible debentures are the debentures whose holders have the option to get them converted wholly or partly into shares. Thesedebentures are usually converted into equity shares. Conversion of the debentures may be:
  • Non-convertible debentures
  • Fully convertible debentures
  • Partly convertible debentures
Sourced From: Financial Management By C. Paramasivan And T. Subramanian

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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