Difference Between Share And Debenture
The main dissimilarities or difference between shares and debentures can be pointed out as follows:
1. Meaning
Share: It represents owned capital of the business
Debenture: It represents borrowed capital of the business
2. Financing Period
Share: It is long term financing option
Debenture: It is medium term financing option
3. Ownership
Share: It provides ownership
Debenture: It is a form of debt. So, it does not provide ownership.
4. Return Received
Share: In the form of dividend
Debenture: In the form of interest
5. Certainty
Share: No certainty of dividend. Dividend is paid in case of profit only.
Debenture: Interest is certain and should be paid fixed rate of interest in case of loss also.
6. Security
Share: Not secure form of investment. It is riskier than debenture.
Debenture: It is secure than shares.
7. Voting And Management Participation
Share: Shareholders can cast their vote and have the right to participate in management.
Debenture: Debenture holders have no right of voting and management participation
8. Identity Of Holders
Share: Shareholders or owners
Debenture: Debenture-holders or creditors
9. Repayment Priority
Share: After debenture-holders and other liabilities.
Debenture: Before shareholders
10. Convertibility
Share: No
Debenture: Yes
11. Redemption
Share: Cannot be redeemed
Debenture: Can be redeemed after maturity
12. Maturity Period
Share: No maturity period
Debenture: Yes
Also Read:
Also Read:
13. Tax Deduction
Share: Dividend is not deducted from taxable income
Debenture: Interest is deducted from taxable income
14. Popularity
Share: Widely used and popular form of investment
Debenture: Less popular than share
15. Nature Of Investors
Share: Risk Takers
Debenture: Risk Averters
Share Vs Debenture (Comparison Chart)
I hope this post is helpful to understand the difference between share and debenture and to make comparison between them.
15. Nature Of Investors
Share: Risk Takers
Debenture: Risk Averters
Share Vs Debenture (Comparison Chart)
Basis For Difference
|
Share
|
Debenture
|
Introduction
|
Owned Capital
|
Borrowed Capital
|
Period
|
Long-term
|
Medium-term
|
Provides Ownership ?
|
Yes
|
No
|
Return
|
Dividend
|
Interest
|
Certainty Of Return
|
No
|
Yes
|
Secure
|
No
|
More secure
|
Management Participation
|
Yes
|
No
|
Holders' Identity
|
Owners
|
Creditors
|
Repayment
|
After debenture
|
Before share
|
Convertibility
|
No
|
Yes
|
Can Be Redeemed ?
|
No
|
Yes
|
Fixed Maturity Period
|
No
|
Yes
|
Tax Deduction
|
No
|
Yes
|
Popularity
|
More
|
Less
|
I hope this post is helpful to understand the difference between share and debenture and to make comparison between them.
