Explanation

The return on debenture holding is interest. Debentures are long-term loans made to a company by investors. Unlike shareholders, debenture holders are creditors of the company, not owners.

When someone buys a debenture, they are lending money to the company. In return, the company promises to pay a fixed rate of interest at regular intervals (usually annually or semi-annually) and to repay the principal amount at a future date.

This interest is a legal obligation of the company and must be paid whether the company makes a profit or not. This is different from dividends, which are payments to shareholders and can only be paid from profits.

Dividends are paid to shareholders as their share of profits. Net profit belongs to the business. Share bonus refers to free shares given to existing shareholders. None of these apply to debenture holders, who only receive interest.