greetings,
my question was, that if the comapny is making a DRR and DRI of 25% and 15% respectively say for the amount of 100000. The company is keeping aside 40% of the amount that it has received in total. So isnt this a loss for the company if we think in a way of capital requirement as the company can only utilise 60% of the total amount received ?
# neha maam
Hi Naved,
The term for which debentures are issued is more than 12 months (since it is a long term liability). Infact, it is usually 5 years, 10 years or may be even more than that. Now, you know that the company is required to create DRR on March 31 of the immediate preceding year in which redemption is to take place. Also, the DRI has to be on April 30 in the year of redemption. For instance, if debentures are issued today for a period of say 5 years, then only at the end of of 4th year, 25% will be transferred to DRR and on April 30 of the last year 15% will be invested in DRI. So, what we can conclude is that for almost 4 years, the company is able to utilise the entire amount invested by the debentureholders in the business.
The term for which debentures are issued is more than 12 months (since it is a long term liability). Infact, it is usually 5 years, 10 years or may be even more than that. Now, you know that the company is required to create DRR on March 31 of the immediate preceding year in which redemption is to take place. Also, the DRI has to be on April 30 in the year of redemption. For instance, if debentures are issued today for a period of say 5 years, then only at the end of of 4th year, 25% will be transferred to DRR and on April 30 of the last year 15% will be invested in DRI. So, what we can conclude is that for almost 4 years, the company is able to utilise the entire amount invested by the debentureholders in the business.