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© 2014 Pearson Canada Inc.#
With regard to external sources of financing for nonfinancial businesses in Canada, which of
the following are accurate statements?
A) Direct finance accounts for a larger share of external business financing in Canada than
indirect finance.
B) Since 1970, most of the newly issued corporate bonds and commercial paper have been sold
directly to Canadian households.
C) Indirect finance accounts for a larger share of external business financing in Canada than
direct finance.
D) Smaller businesses almost always raise funds by issuing marketable securities.
Answer: C
Diff: 2 Type: MC Page Ref: 167 - 169
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Government agencies require that firms that sell securities in public markets adhere to have
____.
A) intermediation
B) nondisclosure
C) independent audits
D) collateral
Answer: C
Diff: 1 Type: MC Page Ref: 167
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Government regulations require publicly traded firms to provide information, reducing
____.
A) transactions costs
B) the need for diversification
C) the adverse selection problem
D) economies of scale
Answer: C
Diff: 1 Type: MC Page Ref: 167
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard