Which instrument is a long-term loan with fixed interest payments and is usually repaid at maturity, though some may be perpetual?

Which instrument is a long-term loan with fixed interest payments and is usually repaid at maturity, though some may be perpetual?

• A. Leasing
• B. Revenue expenditure
• C. Overdrafts
• D. Debentures

Answer: (D)

Debentures are a form of long-term debt issued by a company to raise capital. They involve fixed interest payments (coupons) to investors over the life of the instrument and the repayment of the principal at a set maturity date. Some debentures can be perpetual, meaning there is no fixed maturity, and payments continue indefinitely, but most have a finite end. This combination—long-term borrowing with fixed interest and a future repayment—is what identifies them. Leasing is simply renting an asset, not borrowing money. Revenue expenditure refers to costs that are expensed in the period they are incurred, not financing. An overdraft is short-term borrowing used for cash flow needs.

Debentures are a form of long-term debt issued by a company to raise capital. They involve fixed interest payments (coupons) to investors over the life of the instrument and the repayment of the principal at a set maturity date. Some debentures can be perpetual, meaning there is no fixed maturity, and payments continue indefinitely, but most have a finite end. This combination—long-term borrowing with fixed interest and a future repayment—is what identifies them.

Leasing is simply renting an asset, not borrowing money. Revenue expenditure refers to costs that are expensed in the period they are incurred, not financing. An overdraft is short-term borrowing used for cash flow needs.