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Question : Case Study: UVW Industries - Sustainable Financing for Green Initiatives

UVW Industries is a company committed to sustainable practices and is undertaking environmentally friendly initiatives. The company is exploring various sources of business finance to support its green projects.

Questions : Different Sources of Finance

How do debentures differ 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 represent short-term borrowing


Team Careers360 23rd Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: Debentures pay fixed dividends


Solution : The correct answer is (b) Debentures pay fixed interest

This statement is correct. Debentures pay fixed interest to debenture holders, not dividends. The interest rate is predetermined and agreed upon at the time of issuing the debentures. Debentures are considered to be a safer investment than equity shares, as debenture holders have a higher claim on the company's assets in the event of liquidation. However, this also means that debenture holders earn a lower return than equity shareholders.

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