The _______________________ Best Describes a Situation Where the Least Desirable

question 95

Multiple Choice

The _______________________ best describes a situation where the least desirable individuals are the same individuals who pursue a loan most diligently.

• A)asymmetric information
• B)adverse selection
• C)moral hazard
• D)All of the above are correct.

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Definitions:

Pretax Income

The amount of income earned by a business before taxes have been deducted, also known as earnings before taxes (EBT).

Inventory Amounts

The price of items that are up for sale at the termination of a bookkeeping period.

Audit

An examination of the financial reports to ensure that they represent what they claim and conform with generally accepted accounting principles.

Contra-Asset

A contra-asset account is an asset account where the balance of the account will either be a zero or a negative figure, which offsets the balance of the related asset account.