A Free-Rider Problem Occurs When

question 116

Multiple Choice

A free-rider problem occurs when

• A)people who pay for a good do not benefit from the good.
• B)people who do not pay for a good benefit from the good.
• C)no one benefits from the good.
• D)no firm produces the good.
• E)the good does not exist.

---

Definitions:

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the income or capital gains from the assets will exceed the cost of borrowing.

Cash Ratio

A liquidity metric that measures a company's ability to pay off short-term liabilities with its cash and cash equivalents.

Debt/Equity Ratio

An index reflecting financial leverage through a company's total debts divided by the equity of its shareholders.

Financial Statement Analysis

The process of examining financial statements to assess a company's financial health and make investment decisions.