Which of the following is an advantage of using debentures for a business?

Choosing to use debentures as a source of finance offers the advantage of a fixed interest rate. This means that the cost of borrowing remains stable over the period of the loan, allowing businesses to plan their financials more effectively without worrying that interest costs will increase. A fixed interest rate can help a business better manage cash flow, especially if it has long-term projects or operational expenses which require consistent budgeting.

In contrast to variable interest rates, which can fluctuate with the market, having a fixed rate ensures predictability in loan servicing. This stability can also make it easier for the business to distinguish between fixed and variable costs, facilitating more strategic financial decision-making. The clarity and certainty of a fixed interest rate are essential for businesses looking to maintain financial health, particularly in uncertain economic climates.

While other options may have their own merits in specific contexts, none provide the same level of security and foresight that fixed interest rates offer in terms of long-term financial planning.