Yolanda wants to expand her microbrewery business by buying out a competitor and is going to sell newly-issued corporate bonds to do so.This is an example of using ________ for her expansion plans.

Question

Quizplus · Accepted Answer

Direct finance involves the issuer of the security (in this case, Yolanda's microbrewery) selling newly-issued securities (corporate bonds) directly to investors in order to raise funds for expansion. This is opposed to indirect finance, which involves using financial intermediaries (such as banks) to lend funds to the business. Coupon payments refer to the interest payments made on the corporate bonds, while retained earnings refer to profits that are reinvested back into the business rather than distributed to shareholders.

Yolanda Wants to Expand Her Microbrewery Business by Buying Out