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    Shares and Debentures: A Comparison Chart

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    Jobin John
    Shares represent ownership in a company, while debentures represent borrowed funds. Shareholders are owners and have voting rights, while debenture holders are creditors without voting rights. Dividends paid to shareholders can only come from company profits, while interest on debentures must be paid even without profits. Debentures are paid back before shares in the event of winding up a company. Preference shares have priority over equity shares for dividend payments and repayment of capital.

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    Shares and Debentures: A Comparison Chart

    Uploaded by

    Jobin John
    171 views2 pages
    Shares represent ownership in a company, while debentures represent borrowed funds. Shareholders are owners and have voting rights, while debenture holders are creditors without voting rights. Dividends paid to shareholders can only come from company profits, while interest on debentures must be paid even without profits. Debentures are paid back before shares in the event of winding up a company. Preference shares have priority over equity shares for dividend payments and repayment of capital.

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    Shares and debentures

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    Shares and Debentures

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    Shares represent ownership in a company, while debentures represent borrowed funds. Shareholders are owners and have voting rights, while debenture holders are creditors without voting rights. Dividends paid to shareholders can only come from company profits, while interest on debentures must be paid even without profits. Debentures are paid back before shares in the event of winding up a company. Preference shares have priority over equity shares for dividend payments and repayment of capital.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    171 views2 pages

    Shares and Debentures: A Comparison Chart

    Uploaded by

    Jobin John
    Shares represent ownership in a company, while debentures represent borrowed funds. Shareholders are owners and have voting rights, while debenture holders are creditors without voting rights. Dividends paid to shareholders can only come from company profits, while interest on debentures must be paid even without profits. Debentures are paid back before shares in the event of winding up a company. Preference shares have priority over equity shares for dividend payments and repayment of capital.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Shares and Debentures : A Comparison Chart

    BASIS FOR
    SHARES DEBENTURES
    COMPARISON
    Meaning The shares are the owned The debentures are the borrowed
    funds of the company. funds of the company.

    What does it represent? Shares represent the capital of Debentures represent the debt of
    the company. the company.

    Holder The holder of shares is known The holder of debentures is


    as shareholder. known as debenture holder.

    Status of Holders Owners Creditors


    Nature of Return Dividend. Interest.
    Payment of return Dividend can be paid to Interest can be paid to debenture
    shareholders only out of holders even if there is no profit.
    profits.
    Allowable deduction Dividend is an appropriation Interest is a business expense
    of profit and so it is not and so it is allowed as deduction
    allowed as deduction. from profit.
    Security for payment Payment of dividend depends Whether the company gets profit
    on the decision of the Board or loss, it has to pay Interest on
    debentures as agreed.
    Voting Rights Present Absent
    Conversion Shares can never be converted Debentures can be converted
    into debentures. into shares.
    Repayment in the event Shares are repaid after the Debentures get priority over
    of winding up payment of all the liabilities. shares, and so they are repaid
    before shares.
    Quantum Dividend on shares is an Interest on debentures is a
    appropriation of profit. charge against profit.
    Trust Deed No trust deed is executed in When the debentures are issued
    case of shares. to the public, trust deed must be
    executed.
    Equity and Preference shares : A Comparison Chart

    BASIS FOR
    EQUITY SHARES PREFERENCE SHARES
    COMPARISON
    Meaning Equity shares are the Preference shares are the shares that
    ordinary shares of the carry preferential rights on the
    company representing the matters of payment of dividend and
    part ownership of the repayment of capital.
    shareholder in the
    company.
    Payment of dividend The dividend is paid after Priority in payment of dividend over
    the payment of all equity shareholders.
    liabilities.
    Repayment of capital In the event of winding up In the event of winding up of the
    of the company, equity company, preference shares are
    shares are repaid at the repaid before equity shares.
    end.
    Rate of dividend Fluctuating Fixed
    Redemption No Yes
    Voting rights Equity shares carry voting Normally, preference shares do not
    rights. carry voting rights. However, in
    special circumstances, they get voting
    rights.
    Convertibility Equity shares can never be Preference shares can be converted
    converted. into equity shares.
    Arrears of Dividend Equity shareholders have Preference shareholders generally get
    no rights to get arrears of the arrears of dividend along with the
    the dividend for the present year's dividend, if not paid in
    previous years. the last previous year, except in the
    case of non-cumulative preference
    shares.

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