Debentures are relatively risk-free for investors as they are issued by trusted companies and government organizations in the form of T-Bills or bonds, but they can have disadvantages to the company that issues them because the bonds have a fixed interest rate that may cause loss if the value of a company's products decline with low-interest conditions, as reported by eFinanceManagement. Other factors that hinder the issuer are that the loans affect the company's ability to further secure funding and the bonds are issued in large denominations that require repayment after a fixed amount of time.Know More
The practice of issuing debentures to the public has some major drawbacks based on the terms of the agreement with investors compared to the conditions of the marketplace during the time that they are active.
Fixed interest rates need to be paid yearly and don't fluctuate alongside the market, meaning that if a rise in production of a company's products occurs, the interest payment remains constant and can hinder a business's ability to operate.
The practice of issuing debentures or debt financing raises the leverage of a company, which can lead to bankruptcy or the liquidation of a company's assets to pay back the loans, effectively shutting down the project that the bonds were meant to finance, as explained by eFinanceManagement.Learn more about Credit & Lending
Experian, Trans Union and Equifax are the three major credit bureaus in the U.S. The credit reporting agencies are all for-profit, private companies and are not run by the government.Full Answer >
Accounting Education defines debenture holders as persons, companies or firms that willingly purchase the debentures of another company or companies. E-conomic explains that debentures are a form of long-term loans. If the debt involves buying bonds from the government, the debenture holders are technically bondholders. Even though they do not have voting rights during annual company meetings, they have the right to get fixed interests on the loans or debt.Full Answer >
Before choosing a debt settlement company to use, check the reputation of each of the companies being considered. Find out which has the best reputation for helping its clients pay off debt; avoid companies that are known to make unrealistic promises such as total debt forgiveness. Stay away from companies who charge fees for service upfront or have multiple complaints reported to the Better Business Bureau or state consumer protection departments.Full Answer >
Some of the disadvantages that can result from a company becoming overly focused on profit maximization are the ignoring of risk factors, a lessening or loss of transparency and the compromising of ethics and good business practices. Some profit maximization strategies may produce short-term results that ignore potentially costly situations developing in the long run. Poorly planned short-term profit maximization can also lead to a negative public perception that can significantly affect future sales.Full Answer >