If an Insurance Company Underestimates the Number of High- Cost

question 131

Multiple Choice

If an insurance company underestimates the number of high- cost customers, it is likely to face_______ .

• A)moral hazard
• B)the bad apple problem
• C)adverse selection
• D)the principal- agent problem

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Definitions:

Financing Activities

Transactions related to raising funds or repaying borrowed funds, as reported in the statement of cash flows.

Financing Activities

Transactions a company undertakes to fund its operations and expansions, such as issuing equity or taking on loans.

Indirect Method

A way of calculating cash flows from operating activities by starting with net income and adjusting for changes in non-cash accounts.

Cash Flows

The total amount of money being transferred into and out of a business, particularly affecting liquidity, investment, and operating activities.