Finance companies are more likely to A.have more product expertise because they generally are subsidiaries of industrial companies.B.accept depositsC.make equipment leases to consumers.D.have higher overhead than commercial banks.E.have the extensive regulatory monitoring.
Question
Finance companies are more likely to A.have more product expertise because they generally are subsidiaries of industrial companies.B.accept depositsC.make equipment leases to consumers.D.have higher overhead than commercial banks.E.have the extensive regulatory monitoring.
Solution
Finance companies are more likely to A. have more product expertise because they generally are subsidiaries of industrial companies.
Here's why:
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Finance companies are often subsidiaries of larger industrial or retail companies. They are created to help finance the parent company's products. For example, an automobile manufacturer might have a finance company to provide loans to customers buying its cars.
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Because of this close relationship with the parent company, finance companies often have a deep understanding of the products they are financing. They understand the market, the customers, and the value of the products, which can give them an advantage in assessing risk and setting appropriate loan terms.
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Unlike banks, finance companies do not accept deposits. They get their funds from the parent company or from issuing debt.
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While finance companies do have overhead costs, these are not necessarily higher than those of
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