With Regard to External Sources of Financing for Nonfinancial Businesses

question 48

Multiple Choice

With regard to external sources of financing for nonfinancial businesses in the United States,which of the following are accurate statements?

• A)Marketable securities account for a larger share of external business financing in the United States than in Germany and Japan.
• B)Since 1970,most of the newly issued corporate bonds and commercial paper have been sold directly to American households.
• C)Direct finance accounts for more than 50 percent of the external financing of American businesses.
• D)Smaller businesses almost always raise funds by issuing marketable securities.

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Definitions:

Solvency

The ability of a company to meet its long-term financial commitments and continue its operations.

Profitability

The ability of a company to generate earnings as compared to its expenses and other relevant costs incurred during a specific period.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to fund its operations and growth.

Liquidity

The facility to convert an asset into cash seamlessly without impacting its market rate.