Debenture Meaning: Definition, Examples, and Translations
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debenture
[dษชหbษnสงษr ]
Definition
financial instrument
A debenture is a type of debt instrument that is not secured by physical assets or collateral. Instead, it is backed solely by the creditworthiness and reputation of the issuer. Corporations typically issue debentures as a means to raise capital, often with fixed interest rates.
Synonyms
Examples of usage
- The company issued a debenture to finance its new project.
- Investors were attracted to the debenture due to its high yield.
- After reviewing the debenture terms, she decided to invest.
- He explained the risks associated with purchasing a debenture.
Translations
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Interesting Facts
Finance
- Debentures are often considered a safer investment than stocks because they provide regular interest payments.
- They are typically unsecured, meaning they are not backed by physical assets, relying instead on the company's creditworthiness.
- Different types of debentures include convertible, which can be turned into company equity, and redeemable, which are to be paid back at a specified date.
Legal Framework
- Debenture holders rank higher than shareholders in case a company goes bankrupt; they must be paid before stockholders.
- In many countries, laws govern how companies can issue debentures, ensuring protection for investors.
- Debentures often come with a legal contract detailing the terms of repayment and interest rates.
Global Context
- Countries worldwide use debentures to finance large public projects, like building roads and schools.
- In emerging markets, debentures are becoming an essential tool for corporations to access capital needed for growth.
- Different countries can have various regulations regarding debentures, affecting how they are issued and traded.
Origin of 'debenture'
Main points about word origin
- The word originates from the Latin 'debentur', meaning 'they are owed', which reflects the nature of loans.
- In the 17th century, the term was first used in England to describe a formal way of borrowing money.
- Debentures were crafted as a way for governments and companies to raise funds without giving up ownership rights.
The word 'debenture' has its roots in the early 17th century, derived from the Latin word 'debentur', meaning 'they are owed'. Originally, it referred to a legal document acknowledging a debt. The modern financial use of the term emerged as businesses and governments began to issue formal debt instruments to attract investors. By the 19th century, debentures became a common way for public companies to raise funds, often emphasizing their unsecured nature compared to traditional secured loans. Over time, the legal and financial frameworks around debentures have evolved, making them a staple in corporate finance and investment strategies.