11.SharesvsDebentures.pdf

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Shares
: high risk,
paid last in
liquidation
Debentures
: low risk, have a priority of
payment in liquidation. Those secured by
fixed charges are less risky than those
secured by floating charges.
Risk
Capital growth
Risk
Shares
: on liquidation, the shareholders are
entitled to share in any surplus funds available
after all other debt has been paid
Shares
: dividends paid only
when there are profits
available for distribution
Return
Shares
Capital growth
vs
Debentures
Debentures
: on liquidation, the
debentures are repaid in value and
have no option for capital growth
Debentures
: interest, must be paid as
a pre-tax expense irrespective of the
profitability of the company
Shares
: shareholders can attend
and vote at all company meetings
Return
Ability to influence
company policy
Debenture
: debenture holders have no
ability to influence company policy

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