How the Debenture holder is differ from a Shareholder

A person who hold the shares of the company is known as shareholder and a person who owns the debentures of the company is known as debenture holder.

Company issue shares or debentures in order to raise the funds and meet the requirement of the company, sometimes when a company is lacking or need of finance it issue its part of ownership to the general public which is typically known as shares.

Company issues debentures when company does not give any ownership to the public but by issuing a piece of paper which is debenture company owns the loan on itself and pay them according to the terms and conditions.

The shareholder of a company owns the part of the company and also can become a part of management, a shareholder can take part in the process or activities of the company which are carried out in daily routine.

A person who holds the debenture of the company is not able to take any part in the process of the company .

The payment of both parties are different, they payment which is made to the shareholder is known as profit and the payment which is made to the debenture holder is called as interest, the rate of return on both investment by the external parties are quite different.

The profit which is received by the varies according to the profit which is earned by the company annually but the interest that is received by the debenture holder is fixed as it is a loan and a company has to pay a fixed rate of return on that loan with a margin or markup.

There are some merits and demerits of having debentures or shares of the company, when a person purchases the debentures its merit is that the rate of return on that particular loan or debt is certain regardless the profit of the company and the demerit of the same debenture is that it is fixed for a certain period of time whereas for shareholder it is not fixed, a shareholder can have more than regular profit if the company goes into the profit annually sometimes bonuses as well.

The demerits for a shareholder is also not having a fixed rate because it is possibility that a company may have no profit at a in a financial year in such case the shareholders will not receive any kind of profit.

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