Assume you are a financial manager of a Fortune 500 company. Your firm is planni
ID: 2711708 • Letter: A
Question
Assume you are a financial manager of a Fortune 500 company. Your firm is planning to expand into new markets; hence, you need to borrow $100 million within the next year. Answer the following questions in detail: a. Describe the ways you can borrow the $100 million. b. If you decide to issue debt securities, describe the types of financial institutions that may purchase these securities. c. Discuss how individuals indirectly provide the financing for your firm when they maintain deposits at depository institutions, invest in mutual funds, purchase insurance policies, or invest in pensions.
Explanation / Answer
Answer:-
a. What are the more likely alternatives for you to borrow $100 million?
You could attempt to borrow $100 million from different sources like:-
Factoring the Accounts receivable to financial institutions
You can reach out to hedge Fund lenders
Peer to Peer lenders like from family , friends,etc
Customer Lenders-Taking loan from Business customers
commercial banks,
Savings institutions,
Finance companies in the form of commercial loans.
Alternatively, you may issue debt securities
b. Assuming that you decide to issue debt securities, describe the types of financial institutions that may purchase these securities.
Financial institutions such as
c. How do individuals indirectly provide the financing for your firm when they maintain deposits at depository institutions, invest in mutual funds, purchase insurance policies, or invest in pensions?
Individuals provide funds to financial institutions in the form of bank deposits, investment in mutual funds, purchases of insurance policies, or investment in pensions. The financial institutions may channel the funds toward the purchase of debt securities (and even equity securities) that were issued by large corporations.