Write the difference between debentures and bonds.

The major differences between debentures and bonds are as follows −

Debentures

• The instrument used to raise long term finances.

• Issued by private companies.

• Known as debenture holders.

• Short term tenure.

• Debentures = assets – (Liabilities + shareholders reserve+ Bonds).

• They are both unsecure and secure in nature.

• High risk.

• Gives high interest rate.

• Liquidity is done after bond holders.

• Periodical payment structure.

• Can be convertible to equity shares.

Bonds

• Instruments which highlights the debt taken towards the holders.

• Issued by corporations, government agencies and financial institutions.

• Known as bondholders.

• Tenure is higher than debentures.

• Bonds = assets – (liabilities + shareholders reserve + debentures).

• They are secure in nature.

• Less risk compared to debentures.

• Gives you low interest.

• Liquidity bonds paid first.

• Accrued payment structure.

• Cant convertible to equity shares.

Mandalika

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Updated on: 24-Jul-2020

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