Debenture

AAA

DEFINITION of 'Debenture'

A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

INVESTOPEDIA EXPLAINS 'Debenture'

Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

RELATED TERMS
  1. Effective Net Worth

    The shareholders' equity of a corporation, plus subordinated ...
  2. Fixed Debenture

    A note that carries a fixed (as opposed to floating) charge against ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  5. Hypothecation

    The established practice of a borrower pledging an asset as collateral ...
  6. Unsecured Creditor

    An individual or institution that lends money without obtaining ...
Related Articles
  1. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  2. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  3. A Look At National Debt And Government ...
    Bonds & Fixed Income

    A Look At National Debt And Government ...

  4. The Basics Of The T-Bill
    Bonds & Fixed Income

    The Basics Of The T-Bill

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center