Determine whether each of the following is direct financing or indirect financing.(2 points) selling bonds on the capital market
Selling bonds on the capital market would fall under indirect financing.
Direct financing involves the transfer of funds directly from savers to borrowers, without the involvement of intermediaries or financial institutions. Examples of direct financing include individuals and companies directly lending money, providing equity capital, or issuing securities to raise funds.
Indirect financing, on the other hand, refers to the use of financial intermediaries or institutions to facilitate the flow of funds between savers and borrowers. This includes activities such as banks making loans, insurance companies selling policies, or investment funds intermediating between investors and borrowers.
In the case of selling bonds on the capital market, the issuer (borrower) would typically go through financial intermediaries, such as investment banks, who underwrite and distribute the bonds to investors (savers) in the capital market. Therefore, it would be classified as indirect financing.