MCQ Debentures MCQ

Questions with Answers on Issue of Debentures:

Ques. Debentures which have the charge on the property of the company is ______

(a) Secured

(b) Unsecured

(c) Registered

(d) None of the above

Ans. (a)

Ques. Debenture which are repayable only on the happening of an event of winding up is called

(a) Redeemable

(b) Irredeemable

(c) Perpetual

(d) Both (b) & (c)

Ans. (d)

Ques. When own debentures are cancelled, any profit on cancellation is transferred to ……..

(a) General Reserve

(b) Capital Reserve

(c) Profit and Loss A/c

(d) Debenture A/c

Ans. (b)

Ques. ‘Debenture holders’ of a company are its

(a) Shareholders

(b) Creditors

(c) Debtors

(d) Directors

Ans. (a)

Ques. Return paid on debentures is _______

(a) Interest

(b) dividend

(c) Commission

(d) Tax

Ans. (a)

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Ques. Debentures are shown in the balance sheet under the head ___

(a) Secured loans

(b) Unsecured loans

(c) Provisions

(d) Current liabilities

Ans. (a)

Ques. Discount or loss on issue of debenture is shown in the balance sheet under the head ……..

(a) Reserves & Surplus

(b) Secured loans

(c) Current liabilities

(d) Miscellaneous expenditure

Ans. (d)

Ques. ___is an instrument of acknowledgment of debt.

(a) Equity share

(b) Preference Share

(c) Debenture

(d) All of these

Ans. (c)

Ques. If the purchase price of debentures includes interest for the expired period, the quotation is said to be ___.

(a) Ex‐interest

(b) Cum‐interest

(c) Co‐interest

(d) None of these

Ans. (b)

Ques. Debenture represents __ Of a company

(a) Borrowed capital

(b) Owned capital

(c) Hybrid capital

(d) None of these

Ans. (a)

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Ques. Unsecured debentures does not require any registration because it is not secured by__

(a) Fixed

(b) Floating charge

(c) Both (a) & (b)

(d) None of the above

Ans. (c)

Ques. Debentures payable to a holder of certificate is called_____

(a) Bearer

(b) Unregistered

(c) Secured

(d) Both (a) & (b)

Ans. (a)

Ques. Debentures can be redeemed out of __

(a) Fresh issue

(b) Capital

(c) Profit

(d) All of these

Ans. (d)

Ques. Debenture holders are the __ of a company

(a) Debtors

(b) Owners

(c) Creditors

(d) Borrowers

Ans. (c)

Ques. Debentures payable to person whose name appears both on Debenture Certificate and company’s register is called

(a) Bearer

(b) Unregistered

(c) Registered

(d) None of the above

Ans. (c)

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Ques. For the purpose of debt equity ratio Fully Convertible Debentures are classified as____

(a) Debt

(b) Equity

(c) Both (a) & (b)

(d) None of the above

Ans. (b)

Ques. ___debentures are transferable by mere delivery

(a) Naked

(b) Mortgage

(c) Registered

(d) Bearer

Ans. (d)

Ques. Interest on debenture is __

(a) Adjustment of profit

(b) Appropriation of Profit

(c) Charge on profit

(d) None of these

Ans. (c)

Ques. In case of Partly Convertible Debentures non-convertible portion is classified as_____

(a) Debt

(b) Equity

(c) Both (a) & (b)

(d) None of the above

Ans. (a)

Ques. In case of application for transfer Debenture Certificate is to be issued within ____ months

(a) 1

(b) 2

(c) 3

(d) 4

Ans. (b)

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Ques. Unsecured debentures are called as ___.debentures

(a) Naked

(b) Mortgage

(c) Registered

(d) Bearer

Ans. (a)

Ques. Debenture forms part of

(a) Capital

(b) Loan

(c) Fund

(d) None of the above

Ans. (b)

Ques. If the purchase price of debentures excluding interest for the expired period, the quotation is said to be ___.

(a) Ex‐interest

(b) Cum‐interest

(c) Co‐interest

(d) None of these

Ans. (a)

Ques. Which of the following statement is not correct in context to debentures?

(a) It is an owner’s capital

(b) It may be redeemed through sinking fund

(c) It carries fixed rate of interest

(d) It may be convertible

Ans. (a)

Ques. When debentures are issued as a consideration of purchase of assets ___ Is debited.

(a) Debenture Account

(b) Cash Account

(c) Assets Account

(d) Creditor Account

Ans. (c)

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Ques. Debenture holders will get __

(a) Dividend

(b) Interest

(c) Profit

(d) All of these

Ans. (b)

Ques. ___ debentures can be transferred only with the knowledge of the company.

(a) Naked

(b) Mortgage

(c) Registered

(d) Bearer

Ans. (c)

Ques. __ debentures are secured by the assets of the company

(a) Naked

(b) Mortgage

(c) Registered

(d) Bearer

Ans. (b)

Ques. FCD stands for ___

(a) Fixed Charge Debentures

(b) Floating Charge Debentures

(c) Fully Convertible Debentures

(d) None of these

Ans. (c)

Ques. Discount or loss on issue of debenture is a ___

(a) Capital Profit

(b) Revenue Receipt

(c) Capital Loss

(d) Revenue Expense

Ans. (c)

Related: Questions about Inflation

Ques. This is the interest rate that every debenture /bond carries on its face value and is fixed at the time of issue

(a) current yield

(b) coupon rate

(c) market rate

(d) none of the above

Answer. (b)

Are Debentures an Asset?

Debentures are unsecured bonds issued by a high street bank or other business lender. Debentures are only as secure as the underlying issuer’s financial strength. If a company goes bankrupt, debenture holders would be repaid first, even before the common stockholders. Debentures are non-collateralized debt, and generally refer to longer-term bonds.

In simple terms, debentures are long-term business loans that don’t require collateral, but are secured by the issuer’s creditworthiness and reputation. As such, investors can buy them with the expectation of getting back the amount they originally invested plus interest. This is a risky investment, and investors should only invest in it if they’re confident in the issuer’s ability to pay off the debt. However, with a proper credit profile, debentures can be a viable source of funding for companies with limited or no collateral.

The interest rate of debentures is another important factor. It should be noted that you have to seek the lender’s consent before selling assets that are subject to fixed or floating charges.

Debentures are generally issued by large companies with a good credit rating. While the issuers of these debt securities have a higher credit rating, debentures are still a risky investment. The underlying debt and interest rates are subject to inflation, which means that debentures can provide negative returns if inflation outpaces the interest rate.