What is a debenture?

A debenture is indeed defined as a bond that is not backed by physical assets but rather by the issuer's creditworthiness and reputation. This means that when a company issues a debenture, it relies on its ability to generate revenue and fulfill its financial obligations, rather than on specific collateral.

Debentures typically offer a fixed rate of interest and have a set maturity date. Investors are essentially lending money to the issuer based on the trust that the issuer will be able to make interest payments and repay the principal amount upon maturity. This characteristic is what distinguishes debentures from other types of securities, particularly secured bonds, which are backed by specific assets.

In the context of the other options, equity securities represent ownership in a company and are fundamentally different from debentures, which are a type of debt instrument. Short-term debt securities are typically notes or other instruments with maturities of less than one year, while debentures can have longer durations. Additionally, government bonds are often secured by the taxing power of the government rather than by the issuer’s credit alone, further differentiating them from debentures.