Correct Answer: The difference between Debentures and Preferential Shares is as follows: 1) Person holding debentures has owed money to a company, while Preferential Shareholder could be considered as a partial owner of the company 2) A Preference shareholder earns dividends if the company is making profits, however a debenture holder needs to be paid irrespective of making profits or losses 3) A debenture holder would be paid the capital invested at the end of a stipulated term A preference shareholder is not promised return of capital invested; instead he earns dividends till the time the company exists and is profitable 4) A debenture holder earns interest on the capital invested till the capital is not returned, while a preference shareholder is paid dividends till the time the company exists
