What are debentures primarily characterized by?

Debentures are primarily characterized by being issued by corporations, which allows them to raise funds for various purposes such as expansion, working capital, or refinancing existing debt. Corporations typically issue debentures as a way to borrow money from the public and agree to pay back the principal amount along with interest, usually at fixed intervals.

This highlights the role of debentures in corporate finance, differentiating them from other types of securities such as bonds, which may have different structures, purposes, or security backing. While it is also possible for government entities to issue debentures, the focus here on corporations emphasizes their importance in the private sector.

The other characteristics, such as being secured by physical assets or guaranteeing fixed returns, may apply to various financial instruments but do not specifically define debentures as a whole. Furthermore, the idea of an indefinite maturity period is misleading since most debentures do have a set maturity date, even if they may be long-term. Therefore, recognizing that debentures are primarily characterized by their issuance by corporations provides a clear framework for understanding their function in the financial markets.