29.What is the primary purpose of debentures? A. Ownership in a company B. Fixed-rate interest payments C. Voting rights D. Venture capital funds
Question
29.What is the primary purpose of debentures? A. Ownership in a company B. Fixed-rate interest payments C. Voting rights D. Venture capital funds
Solution
The primary purpose of debentures is B. Fixed-rate interest payments.
Debentures are a type of debt instrument that is not secured by physical assets or collateral. They are backed only by the general creditworthiness and reputation of the issuer. The primary purpose of issuing debentures is to raise capital for the company. The company pays a fixed rate of interest to the debenture holders, which is why option B is the correct answer.
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