DEBENTURES Meaning and
Definition
-
Debentures refer to a type of long-term debt instrument that is issued by corporations, governments, and other entities to raise funds from investors. These securities are typically backed by the issuer's general creditworthiness rather than any specific assets or collateral.
Debentures are commonly used by corporations to finance various business activities, such as expansion plans, acquisitions, or working capital requirements. They are also utilized by governments to fund public infrastructure projects and other public expenditures. Investors who purchase these securities effectively lend money to the issuer in exchange for regular interest payments and the return of the principal amount upon maturity.
One distinguishing feature of debentures is their fixed interest rate, which remains constant throughout the life of the bond. Unlike other types of debt instruments, the interest on debentures is typically paid semi-annually or annually. Additionally, debentures often have a predetermined maturity date, after which the principal amount must be repaid to the debenture holders.
Debentures are considered unsecured, meaning they are not secured by specific assets. If the issuer defaults on the interest or principal payments, debenture holders may have a claim against the general assets of the issuer. However, in the event of bankruptcy or liquidation, debenture holders are usually lower in priority compared to secured creditors and bondholders.
Overall, debentures serve as a means for corporations and governments to borrow money from the public or institutional investors, providing borrowers with long-term financing while offering investors a fixed income stream over the term of the investment.
Common Misspellings for DEBENTURES
Etymology of DEBENTURES
The word "debentures" originated from the Latin term "debentur", which means "there are owed" or "owed". "Debentur" is the passive plural form of the Latin verb "debere", meaning "to owe". The term was initially used in medieval Latin legal documents to refer to a document that acknowledged a debt or obligation. Over time, "debenture" became the accepted form of this word in English, and it specifically refers to a type of bond or loan certificate issued by a company or government entity to acknowledge debt owed to investors.
Similar spelling words for DEBENTURES
Infographic
Add the infographic to your website:
