Sarthaks Test
0 votes
in Accounts by (64.1k points)
What is meant by the redemption of debentures by ‘Purchase in the Open Market?

1 Answer

0 votes
by (106k points)
selected by
Best answer

A company, if authorised by its Articles of Association, can redeem its own debentures by purchasing them in the open market. 

This is advantageous for several reasons 

(I) It would be saving the amount of interest on debentures purchased and cancelled. 

(ii) Sometimes the own debentures are being sold at a discount. It would enable the company to save money equai to the amount of discount i.e., profit on redemption of debentures. 

(iii) Debentures so purchased may be kept alive as investment. In need of fund, they can again be sold off in the market. 

Objectives There may be the following objectives for purchasing own debentures in the open market 

(i) For immediate cancellation of debentures. 

(ii) For investment in the own debentures.

Related questions

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.