Define debentures ? Explain its three merits

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#1

Debentures are the acknowledgement of debt taken by a company from the public for a fixed period of time at a given rate of interest.
Debentures give following benefits/merits:
(a) Low cost : the cost of raising debentures is less than the cost of raising preference shares or equity shares. It is a cheaper source of finance. -
(b) No dilution of control : Debenture holders do not get any voting rights. They are not allowed to participate in decision making. Thus do not dilute the control of equity shareholders.
© Tax benefit for the company : The interest paid to debenture holders is considered as an expense of the company so the liabiltiy of tax reduces and the company gets tax benefits issuing debentures.