Question

State, with reason, whether the following statement is True or False

The bond holders are owners of the company.

Answer 1

This statement is False.

Reasons :

(i) Bond is an interest bearing certificate issued by a Government, Semi-Government., or business firms to raise capital.

(ii) The bondholders are entitled to get a fixed rate of interest on the amount invested in bonds. It is paid compulsorily by the company even if profits are not earned.

(iii) The holders of such debt security becomes the creditors of the company and they have no right to attend the general meetings and participate in the management through voting rights.

(iv) Since bondholders are non-owners, they are not entitled to get dividend which is paid only to the owners of the company i.e., shareholders. Hence, bondholders are not the owners of the company.