2003 General Studies, all questions

UPSC Prelims 2003 · General Studies

Question 46: Economy and Social Development

Debenture holders of a company are its

aShareholders
bCreditors
cDebtors
dDirectors

AnswerThe answer is (b).

Debentures are a debt instrument: a company borrows money from the public and issues debenture certificates, promising a fixed rate of interest and repayment on a set date. So debenture holders are the company's creditors, not its owners. Shareholders are the owners, and their dividends depend on profit. In a winding up, creditors are paid before shareholders. Remember: debenture means debt, share means ownership.

Why each option is right or wrong
  • (a) Shareholders own the company; debenture holders only lend to it.
  • (b) Correct: creditors.
  • (c) Debtors are those who owe money to the company.
  • (d) Directors manage the company; debenture holders do not.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2003, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.