Q1: 1. What is the process of repaying debentures to the debenture holders known as?

• A) Redemption
• B) Conversion
• C) Issuance
• D) Amortization

Q2: 2. When a company redeems debentures, it is essentially

• A) Reducing its liabilities
• B) Increasing its assets
• C) Declaring dividends
• D) Issuing new shares

Q3: 3. Which of the following is NOT a method of redeeming debentures?

• A) Conversion into equity shares
• B) Payment in cash
• C) Issue of bonus debentures
• D) Transfer to reserves

Q4: 4. The redemption of debentures leads to a decrease in

• A) Cash reserves
• B) Share capital
• C) Debt obligations
• D) Retained earnings

Q5: 5. What is the primary objective of redeeming debentures?

• A) Increase shareholder wealth
• B) Obtain short-term financing
• C) Reduce interest expenses
• D) Enhance credit rating

Q6: 6. When a company redeems debentures at a premium, it indicates that

• A) The debentures were issued at a discount
• B) The company has excess cash reserves
• C) Investors will receive more than the face value
• D) Interest rates have decreased

Q7: 7. Which financial statement is impacted by the redemption of debentures?

• A) Income statement
• B) Cash flow statement
• C) Balance sheet
• D) Statement of changes in equity

Q8: 8. If a company decides to redeem debentures by issuing new shares, it may lead to

• A) Dilution of ownership
• B) Increase in dividends
• C) Reduction in stock price
• D) Lower interest expenses

Q9: 9. Redemption of debentures is a common practice among companies seeking to

• A) Raise long-term capital
• B) Improve liquidity position
• C) Attract new investors
• D) Reduce gearing ratio

Q10: 10. Which of the following is NOT a reason for redeeming debentures?

• A) To avoid bankruptcy
• B) To reduce interest costs
• C) To enhance creditworthiness
• D) To increase retained earnings

Q11: 11. When a company redeems debentures at a discount, it implies that

• A) Investors will receive less than the face value
• B) The debentures were issued at a premium
• C) Interest rates have increased
• D) The company is facing financial distress

Q12: 12. How does the redemption of debentures affect the company's debt-equity ratio?

• A) Increases
• B) Decreases
• C) Remains unchanged
• D) Cannot be determined

Q13: 13. A company decides to redeem debentures using its retained earnings. This action results in

• A) Decrease in cash reserves
• B) Increase in interest expenses
• C) Lower dividend payments
• D) Reduction in equity capital

Q14: 14. Which of the following is a disadvantage of redeeming debentures at a premium?

• A) Increased financial leverage
• B) Lower interest costs
• C) Negative impact on earnings per share
• D) Enhanced credit rating

Q15: 15. What happens to the face value of debentures upon redemption?

• A) It decreases
• B) It increases
• C) It remains unchanged
• D) It fluctuates based on market conditions

Q16: 16. The redemption of debentures is a strategy commonly used by companies to

• A) Increase tax liabilities
• B) Improve return on investment
• C) Enhance solvency position
• D) Decrease liquidity

Q17: 17. How does the redemption of debentures impact the company's interest coverage ratio?

• A) Increases
• B) Decreases
• C) Unchanged
• D) Depends on the redemption method

Q18: 18. Which of the following is a source of funds for redeeming debentures?

• A) Trade payables
• B) Bank overdraft
• C) Proceeds from new share issue
• D) Accrued expenses

Q19: 19. What is the main difference between redeemable and irredeemable debentures?

• A) Maturity period
• B) Interest rate
• C) Conversion rights
• D) Credit rating

Q20: 20. A company decides to redeem debentures by converting them into equity shares. This action may lead to

• A) Higher debt-equity ratio
• B) Decrease in share capital
• C) Dilution of ownership
• D) Increased interest expenses

Q21: 21. Which statement best describes the impact of redeeming debentures on a company's financial position?

• A) Strengthens the balance sheet
• B) Increases operating expenses
• C) Reduces cash flow
• D) Raises the cost of capital

Q22: 22. If a company fails to redeem debentures on the specified date, it may face

• A) Lawsuits from debenture holders
• B) Lower interest rates
• C) Higher credit rating
• D) Favorable investor sentiment

Q23: 23. The redemption of debentures is a form of

• A) Equity financing
• B) Debt financing
• C) Hybrid financing
• D) Working capital financing

Q24: 24. What is the impact of redeeming debentures at a premium on the company's reserves?

• A) Decrease
• B) Increase
• C) No impact
• D) Depends on the redemption method

Q25: 25. When a company redeems debentures, it is essentially

• A) Reducing its equity capital
• B) Increasing its long-term liabilities
• C) Lowering its interest expenses
• D) Distributing dividends to shareholders