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Question : Case Study: PQR Enterprises - Funding Strategies for Diversification

PQR Enterprises is a well-established conglomerate planning to diversify its business operations. The company is evaluating various sources of business finance to support its diversification plans.

Questions : Different Sources of Finance

In the context of financing, what are debentures?

Option 1: Equity shares with voting rights
  

Option 2: Short-term borrowing from banks
    

Option 3: Long-term debt securities

   

Option 4: Government-issued bonds


Team Careers360 25th Jan, 2024
Answer (1)
Team Careers360 26th Jan, 2024

Correct Answer: Long-term debt securities


Solution : The correct answer is (c) Long-term debt securities

Debentures are long-term debt instruments issued by companies or institutions to raise funds. Debenture holders are creditors to the company or institution and are entitled to receive periodic interest payments at a specified rate. The principal amount is repaid to debenture holders at maturity. Unlike equity shares debentures do not represent ownership in the company. They are a form of borrowing by the issuing entity. Additionally, debentures are not short-term borrowing or government-issued bonds .

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