That Only Large,well-Established Corporations Have Access to Securities Markets

question 20

Multiple Choice

That only large,well-established corporations have access to securities markets

• A)explains why indirect finance is such an important source of external funds for businesses.
• B)can be explained by the problem of moral hazard.
• C)can be explained by government regulations that prohibit small firms from acquiring funds in securities markets.
• D)explains why newer and smaller corporations rely so heavily on the new issues market for funds.

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Definitions:

Uncertain Future Event

A potential occurrence or situation whose outcome cannot be predicted with certainty, often impacting planning and decision-making.

Economicbenefits

The potential to bring about advantages in terms of increased cash flows or reduced cash outflows, contributing to the value of an entity.

Bank Guarantee

A financial instrument provided by a bank on behalf of a client, ensuring payment to a beneficiary if the client fails to fulfill contractual obligations.

Contingent Liability

A potential financial obligation that may arise in the future, dependent on the occurrence of certain events.