Final answer:
Borrowing is crucial for both individuals and businesses to cover current expenses or fund future growth; the quantity demanded of financial capital shifts with confidence in future repayment capacity. Nordstrom may borrow during high business activity for inventory and receivables, while firms often finance long-term projects through bank loans or bonds issuance.
Step-by-step explanation:
Borrowing is a common financial strategy used by both individuals and businesses to meet present needs or pursue future gains with the promise of repayment in the future when income or revenue is higher. Individuals may borrow to purchase homes or cars, while college students often need to finance their education. Similarly, businesses like Nordstrom might borrow money during periods of increased activity to finance inventory and accounts receivable.
A business may also seek financial investment to fund long-term projects such as the construction of a factory or the development of new technology. These investments often do not provide immediate returns but are crucial for sustainable growth and future profitability. The quantity demanded of financial capital at any given interest rate will shift to the right when there is greater confidence in the ability to repay these financial obligations in the future.
There are two main ways businesses can borrow funds: through banks and by issuing bonds. These methods come into play when a company has proven its ability to generate revenue or profit, which enables it to make a credible promise to pay back the borrowed amounts with interest.