Today, we will simply learn about the main differences between the debentures and equity.
The differentiation to debentures and equity will also clear the main benefits of each instruments.
Debentures and Equity
Following are the differences between the debentures and equity:
|Debenture Instruments do not give ownership rights to it’s holders.||Equity Instruments entitle the holders to own part of the business.|
|Interest is payable||Dividend is payable|
|Interest is legal obligation to pay||Dividend is not legally necessary|
|Debt holders get preference in case of dissolution of company||Equity holders are paid only after all other obligations are met.|
|Interest not paid is carried forward||Dividend cannot be carry forward.|
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