Question : Case Study: ABC Corporation - Financing Growth Strategies
ABC Corporation, a leading manufacturing company, is looking to finance its growth strategies. The company is exploring various sources of business finance to achieve its expansion goals.
Questions : Debentures and Financial Instruments
What distinguishes debentures from equity shares in terms of ownership and returns?
Option 1: Debentures provide ownership rights
Option 2: Debentures pay fixed dividends
Option 3: Equity shares have fixed interest rates
Option 4: Equity shares are a form of long-term borrowing
Correct Answer:
Debentures pay fixed dividends
Solution : The correct answer is (b) Debentures pay fixed interest
Debentures pay fixed interest to the debenture holders, as they are a form of debt and represent a loan from the debenture holder to the issuing company. In contrast, equity shares represent ownership in the company and do not guarantee fixed dividend payments; the dividends paid to equity shareholders are typically based on the company's profitability and decisions made by the board of directors.
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