Adverse Selection Occurs When

question 14

Multiple Choice

Adverse selection occurs when

• A) a person takes more risks that are not known to the life insurance company because he has life insurance.
• B) a person buys life insurance because he has a risky lifestyle that is not known to the life insurance company.
• C) a person is a risk lover.
• D) pregnant women with health insurance make more doctor visits than uninsured pregnant women.

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Definitions:

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets.

Accounts Receivable Turnover

A financial metric that measures how efficiently a company collects receivables from customers, indicating the number of times average receivables are collected during a period.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a specified period, indicating the efficiency of inventory management.

Days' Sales In Inventory

Days' sales in inventory is a financial ratio that shows how many days, on average, it takes for a company to turn its inventory into sales, indicating inventory management efficiency.