Bonds without any security other than the general assets and credit of the issuer, Government, state, and municipal bonds, i.e., all civil bonds, are by definition debenture bonds since they are not secured by mortgages or any other specific pledge of assets. Notwithstanding this fact, civil bonds represent the highest class of investments because their payment rests upon the taxing power and general credit.
Debenture bonds issued by corporations are, as a class, not considered high-grade investments, although where the general credit of the issuer is strong, they may command a high position. Their strength depends upon the equity in the general assets, the extent of bond issues having prior liens, range of fluctuation of earnings, and margin of average earnings over prior charges. Debenture bonds are sometimes known as plain debentures.
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