How Can Using Indirect Finance Rather Than Direct Finance Reduce

question 4

Essay

How can using indirect finance rather than direct finance reduce agency costs associated with monitoring funds demanders?

Distinguish between perfectly inelastic and perfectly elastic demand.

Analyze the relationship between price changes and total revenue.

Identify the elasticity section of the demand curve (elastic, inelastic, unit elastic).

Understand the effect of government policies on consumption based on price elasticity.

---

Definitions:

Repurchase Shares

The buying back of a company's own shares from the marketplace, which can increase shareholder value by reducing the number of outstanding shares.

Debt-Equity Ratio

The ratio that delineates the usage of shareholder equity and debt in the financing of company assets.

Pre-Tax Cost

The expense or cost associated with an activity or asset before the application of taxes, often used in financial analysis.

Required Return

The minimum expected return investors demand for investing in a security or project.