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Distinguish Between Direct Finance and Indirect Finance

question 6

Essay

Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in Canada?


Definitions:

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.

Debentures

Long-term debt instruments issued by corporations to borrow money, often secured only by the general creditworthiness of the issuer.

Collateral

An asset that a borrower offers to a lender as security for a loan, which can be seized by the lender if the borrower fails to repay the loan.

Secured Bonds

Bonds that are backed by collateral or assets, providing a higher level of security to bondholders.

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