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1. State four differences between debenture stock and unsecured loan stock.

1. State four differences between debenture stock and unsecured loan stock.

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Answer #1

Debenture Stock

Unsecured Loan Stock

1.

It refers to a contract between a company and loan provider, which specifies interest rate and sum of money to be refunded at the specified date.

Unsecured loan stock refers to a loan provided to company without collateral.

2.

In case of liquidation, debenture stock is paid after all debts.

In case of of liquidation of company, unsecured loan stock does not have claim on assets of the company.

3.

Debenture stock is almost operated like preferred stock.

Unsecured loan stock is not treated as preferred sock.

4.

In case of default in refund of money, holders may appoint a receiver to seize and realize money from assets of the company.

But such facility is not available to the unsecured loan stock holders.
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