Both Screening and Signaling

question 103

Multiple Choice

Both screening and signaling:

• A)correct inefficiency in the market.
• B)allow more transactions to take place that are valuable to buyers and sellers.
• C)can increase surplus gained in a market.
• D)All of these are true.

---

Definitions:

Straight-Line Depreciation

A method for distributing the financial commitment of a physical asset over its operational life in uniform yearly figures.

Capital Budgeting

The process by which a business evaluates and selects long-term investments based on their potential to generate net cash flows over time.

After-Tax Discount Rate

The rate used to discount future cash flows to their present value after accounting for taxes.

Working Capital

The difference between a company’s current assets and current liabilities, indicating the amount of liquid assets available to fund the company’s day-to-day operations.