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What are the disadvantages of debentures?
The disadvantages of debentures are as follows:
1) Interest on debentures and capital repayment are obligatory payments.
2) Debentures are a secured source of raising the long term requirements of funds and usually the security offered to the investors is the fixed assets of the company.
3) Debenture financing enhances the financial risk.
4) These instruments are not suitable for companies whose earnings fluctuate considerably.
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