Increases in a Borrower's Net Worth

question 19

Multiple Choice

Increases in a borrower's net worth:

• A) reduces the problem of moral hazard.
• B) lowers the information costs of lending.
• C) reduces the problem of adverse selection.
• D) all of the answers given are correct.

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Definitions:

Net Profit Margin

A financial metric that shows the percentage of profit a company generates from its total revenue, indicating profitability efficiency.

Gross Margin Percentage

A financial ratio that indicates the percentage of revenue that exceeds the cost of goods sold (COGS), a measure of profitability.

Total Assets

The total sum of all assets, both current and non-current, owned by a business.

Average Collection

The average period of time it takes for a business to receive payments owed by its customers.