In a World Without FIs, Households Will Be Less Willing

question 71

Multiple Choice

In a world without FIs, households will be less willing to invest in corporate securities because they

• A)are not able to monitor the activities of the corporation more closely than FIs.
• B)tend to prefer shorter, more liquid securities.
• C)are subject to price risk when corporate securities are sold.
• D)may not have enough funds to purchase corporate securities.
• E)All of these.

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Definitions:

Capital Structure

The mix of different forms of capital a company uses to finance its operations and growth, including debt, equity, and hybrid securities.

Bankruptcy Risk

The possibility that a company or individual will be unable to meet their financial obligations when they come due, leading to bankruptcy proceedings.

Financial Characteristics

Attributes that describe the financial health and performance of a company, including liquidity, debt levels, revenue growth, and profitability.

Industry Characteristics

These are the unique traits and trends that define the operations, competitive environment, and market behavior of a specific industry.