Q. Consider the following statements regarding bonds and debentures:

1. A debenture is always unsecured, while a bond is always secured.
2. On liquidation of a company, debenture holders are paid before bond holders.

Select the correct option from the codes given below:
Answer: Neither 1 nor 2
Notes: Bonds and debentures can both be secured or unsecured, depending on the terms of issue. Generally, bonds are secured, but exceptions exist. During liquidation, payment priority depends on the security attached; secured creditors are paid before unsecured creditors, irrespective of the instrument being a bond or debenture. Thus, both statements are incorrect.