Question

Which of the following statements regarding direct finance is true​? A. In the United​ States, more funds flow through the direct financial channels than through indirect financial channels. B. Securities are assets for the firm that issues them and liabilities for the individual that buys them. C. Direct finance requires the use of financial intermediaries. D. Direct finance occurs when borrowers sell securities directly to lenders.

Answer 1

Answer: Option D

Explanation: In simple words, direct finance refers to the situation when the borrowers borrows money directly from lenders, and do not consider taking help from any intermediary. In other words, when the issuers in the financial market sell their securities directly to the general investors then such financing is termed as direct financing.

This financing is cheaper and benefits both he lender and the borrower. Hence we can conclude that the correct option is D.