Determine whether each of the following is direct financing or indirect financing.(1 point)

Question

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Direct Financing Indirect Financing

Answer 1

To determine whether a scenario represents direct financing or indirect financing, we can look at the definitions:

• Direct Financing: This occurs when borrowers sell securities directly to lenders in financial markets. For example, when a company issues stocks or bonds and investors buy them directly.

• Indirect Financing: This occurs when intermediaries, such as banks or other financial institutions, facilitate the flow of funds between savers and borrowers. For example, when a person deposits money in a bank, and the bank lends that money out to borrowers.

If you have specific scenarios to evaluate, please provide them. Otherwise, here are typical examples:

1. A company issues bonds directly to investors. (Direct Financing)
2. A borrower takes a loan from a bank after depositing funds in the same bank. (Indirect Financing)
3. An entrepreneur seeks crowdfunding online by issuing shares to public investors. (Direct Financing)
4. A person buys stocks through a brokerage firm. (Indirect Financing)

You can categorize these examples under "Direct Financing" or "Indirect Financing" accordingly. If you provide scenarios, I can help categorize them for you!