ExpertEasy1 markMultiple Choice
ACCA · Question 37 · Capital and the financing of companies
In company law, which of the following best defines a 'debenture'?
In company law, which of the following best defines a 'debenture'?
Answer options:
A.
A type of preference share.
B.
A document issued by a company containing an acknowledgment of its indebtedness.
C.
A dividend payment made to shareholders.
D.
A statutory demand for unpaid tax.
How to approach this question
Recognize that a debenture relates to debt (loan capital), not equity (shares).
Full Answer
B.A document issued by a company containing an acknowledgment of its indebtedness.✓ Correct
A debenture is essentially a document that acknowledges a debt owed by the company. It is the primary way companies raise loan capital. It may or may not be secured by a charge over the company's assets.
Common mistakes
Assuming a debenture is a type of share. Debenture holders are creditors, not members (shareholders).
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