Distinguish, differentiate, compare and explain what is the difference between Debentures and Bonds. Comparison and Differences.
Differences between Debentures and Bonds
| S.No. | Debentures | Bonds |
| 1 | Debentures are mostly issued by private companies. | Bonds are issued by financial institutions, government agencies and large corporations. |
| 2 | A debenture investment is for short term. | The investment tenure for bonds is for long term. |
| 3 | Interest payment happens on a periodical basis, which is often dependent on the company's performance. | Payment of interest in bonds is on accrual basis. They are paid monthly, semi-annually and annually. |
| 4 | Debenture investment has high risk. People generally invest due to the reputation of the company. | Bonds have low risk. |
| 5 | It is not secured by collateral. | It is secured by collateral. |
| 6 | Offers high rate of returns, since it is not backed by collateral. | Offers low rate of interest, as it is backed by collateral. |
| 7 | There are convertible debentures that allow the holder to convert these into shares, if they believe it has a potential to generate profits in future. | Bonds cannot be converted to equity shares. |
| 8 | Debenture holders will be paid after bond holders, in case the company shuts down. | In case of liquidation of an organisation, the bond holders will be paid first, followed by the debenture investors. |
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Difference between Bonds vs Debentures
Debentures vs Bonds
Differences between Bonds vs Debentures
