Question

Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices, and the company wishes to raise the funds through direct finance. Which of the following methods could it use?
a. It could issue $20 million in stocks.
b. It could sell $20 million in bonds.
c. It could borrow $20 million from a bank.
d. It could choose either A or B.

Answer 1

Answer:

D

Explanation:

Direct finance is when a company or individual borrows money directly from the financial market without the aid of a financial intermediary.

Examples include :

• issuing bonds
• issuing shares

Indirect finance is when a company or individual borrows money through a financial intermediary. for example, borrowing from a bank