What is the main function of a debenture for a corporation?

A debenture serves as a critical financial instrument for a corporation primarily by enabling the company to raise long-term funds without requiring collateral. Unlike secured loans, which are backed by specific assets, debentures are typically unsecured and rely on the creditworthiness and reputation of the issuing corporation. This allows companies to have greater flexibility in financing projects, expansions, or operating expenses while attracting a diverse pool of investors who may be looking for fixed income opportunities.

The nature of debentures means that they often come with a fixed interest rate and a specific repayment schedule, making them an appealing option for raising capital in a stable and predictable manner. This financial structure helps corporations manage their funding needs more effectively and gives them access to capital markets.

Other options present different financial concepts that do not align with the primary function of a debenture. For example, while short-term financing refers to immediate funding needs, debentures are designed for longer-term capital requirements. Mergers and acquisitions involve complex strategic considerations and negotiations that are not directly linked to the purpose of debentures. Regulatory compliance, while essential for corporate governance, is not inherently connected to the function of a debenture as a funding mechanism. Thus, the option highlighting the use of debentures to raise long