FINANCIAL

DEBENTURES
GROUP MEMBERS: QISTINA, KYRA,
GISELLE AND PARVEENA.
What is a Financial
Debentures?
Debentures refers to a long term fixed interest
bearing security, issued by the company to
raise funds.
A debenture is a type of bond. More specifically,
it is an unsecured or non-collateralized debt
issued by any entity. It refers to such bonds with
longer maturities.

Difference between
bonds and debentures
Bonds are debt financial instruments issued by financial
institutions, big corporations, and government agencies
having the backing of collaterals and physical assets.
Debentures are debt financial instruments issued by
private companies but are not backed by any collaterals
or physical assets.
 ADVANTAGES AND DISADVANTAGES
of financial debentures

Advantages
The companies control will remain in the hands of its
shareholder, even the profit-sharing ratio remains the
same
Debentures holders are paid off first, as it is treated as
a liability to the business
The use of debentures can encourage long term
funding to grow a business
Disadvantages
No flexibility in making payments to the debenture
holder
Holders of the debenture are not allowed to have
any share or votes on the profits.
The person buying the debenture must pay a fixed
rate of interest which can be a significant burden to
them is the market interest rate rises

Valuable financial protection and reassurances are Debentures can put a permanent burden on a
provided for directors as regards their personal funds companies finances

Debentures usually provides a fixed rate of interest for

the lender and this has to be paid before any dividends
are issued to shareholders
 AN EXAMPLE OF
FINANCIAL DEBENTURES:

Let's say Company A is a well-established manufacturing company that

is looking to expand its operations. To raise funds for this expansion, the
company decides to issue financial debentures. A debenture is a type of
long-term bond that is not backed by any specific collateral but is
supported by the issuer.
Company A plans to issue $10 million worth of debentures over the span
of 10 years. The debentures will pay a yearly stock-still interest rate of
5%. Investors who purchase these debentures will receive interest
payments on a yearly understructure throughout the tenancy, and the
principal value will be repaid at the end of the 10 years.
By issuing financial debentures, Company A successfully raises the
necessary funds to finance its expansion plans. The debenture holders
receive regular interest payments and, at the end of the tenure, get
their principal value back. This allows both Company A and the investors
to meet their respective financial goals.
THANK YOU!