Sources of Business Finance — OCM STD 11 Commerce — Question
Gujarat BoardEnglish MediumSTD 11 CommerceOCMSources of Business Finance3 Marks
Question
'Convertible debentures have become much popular'. - Discuss.
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Answer
Convertible debenture means the debenture which is to be converted into equity share after specified time period. These debenture holders get fixed interest from the company in the initial years.
After establishment, when the profit is not very high, this rate of interest appears much attractive. Gradually, the profit of the company increases and along with it the value of equity share also increases. Debenture holder can get their debenture converted into share as per scheme.
Debenture is partly or completely converted into Equity Share. The debenture holder thereafter becomes a shareholder and gets the right to get dividend.
Initially convertible debenture holder gets interest and becomes the creditor. After conversion he becomes a shareholder means owner and enjoys double benefit.
This has made convertible debenture more popular.
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