Question

A long-term source of external finance which gives holders a fixed rate of return (interest) but without any ownership or voting rights.

A) Equity
B) Debenture
C) Preference share
D) Common stock

Answer 1

A debenture is a long-term financial instrument used by companies to borrow money, offering a fixed coupon rate of interest to holders, without providing ownership or voting rights.

Step-by-step explanation:

The correct answer to the question is B) Debenture. A debenture is a type of long-term finance used by corporations to borrow money. Debenture holders receive a fixed rate of interest, known as the coupon rate, regardless of the company's financial performance. Unlike equity or common stock holders, debenture holders do not have any ownership stakes or voting rights in the company. Debentures can be considered as a loan to the company, and they must be repaid at the end of the term, irrespective of the company's profitability.