What is the difference between Shares and Debentures? - ProProfs Discuss
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What is the difference between Shares and Debentures?

Asked by Isa , Last updated: Sep 17, 2020

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2 Answers

W. Pratt

W. Pratt

Want to learn new things and share my knowledge

W. Pratt
W. Pratt, Marketing Analyst, MBA, Lincoln

Answered Aug 04, 2020

Shares and debentures actually represent assets that have been traded in the security markets with unique characteristics that define both the return and the risks involved. Share is the part where a company gets it, which is profit based on the price performance and the dividends paid to investors.

Shares can also be issued; this depends on the disjunctive between offered dividends and the right to vote in the actionist’s board. Debentures, on the other hand, are passives that are acquired for a firm to pay its holder a particular interest in order to exchange or obtain immediate resources so as to invest them and payback in a future date.

Debentures can be issued by the government in order to finance budget; it can also be issued by a private firm so as to finance new investment projects. When uncertainty is absent between assets, including shares and debentures, the return must be the same.

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A. Samuel

A. Samuel

Writing quality content for contentment has been my passion since i was 21. I've been pursuing it as a Content Manager and Producer.

A. Samuel
A. Samuel, Content Manager, Masters in Marketing and accounting, Florida

Answered Jul 21, 2020

Shares are sold to investors by companies in order to source capital. To investors, shares are like a financial instrument which makes an investor owns a part of a company. Shares are sold in exchange for a particular amount from each investor. The return of this type of investment is based on the performance of the firm.

This means what an investor gets as returns depend on whether a firm is making profit or loss. A debenture, on the other hand, refers to a type of debt security issued big companies to borrow money from investors. Shareholders in a company also own a part of the company, whereas debentures do not mean that an investor owns a part of the company, but he or she is entitled to be paid a certain amount of money as interest.

The expected return for an investor is dependent on the performance of the firm. In debentures, the expected return of investment is fixed and does not depend on the performance of a company.

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