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| Basis of Comparison | Shares | Debenture |
| Meaning | Shares are funds that are owned by company | Debentures are funds that are borrowed from outside i.e. it is debt for company |
| Dividend | Shareholders earn dividend from the profit of the company | Debenture holders earn interest for the amount taken as debt |
| Deduction | Being appropriation of profit not liable to be deducted | Being a expense for business, deducted from profit |
| Conversion | Shares cannot be converted into debentures | Some debentures can be converted into shares after a period of time |
| Voting Right | Shareholders have voting right | No voting right |
| Risk | Shareholders have the highest risk | Debenture holders have the lowest risk |
| Compulsion to return | It is not mandatory to declare dividend | It is mandatory to pay interest to creditors. |
| Status of Holders | Shareholders are owners | Debenture holders are creditors |
| Position in Financial Statement | Shown under Shareholder Funds on equity and liabilities side of Balance Sheet | Shown as non-current liabilities in equity and liabilities side of Balance Sheet. |
| Status at Liquidation | Payment made after clearing all liabilities | Payment made before shareholders. |
Debentures are also called as long term debts. A company issues debentures for getting funding for achieving growth in the long term. Interest needs to be paid on those loans. This interest is an expense for the business and is deducted as per applicable tax laws. Hence, debentures are known as loan capital.