Both Screening and Signaling

question 34

Multiple Choice

Both screening and signaling:

• A) are ways to decrease information asymmetry between two parties.
• B) correct inefficiency in the market.
• C) can increase surplus gained in a market.
• D) All of these statements are true.

---

Definitions:

Capital Structure

The mix of different forms of capital a company uses to finance its operations and growth, including debt, equity, and hybrid securities.

Bankruptcy Risk

The possibility that a company or individual will be unable to meet their financial obligations when they come due, leading to bankruptcy proceedings.

Financial Characteristics

Attributes that describe the financial health and performance of a company, including liquidity, debt levels, revenue growth, and profitability.

Industry Characteristics

These are the unique traits and trends that define the operations, competitive environment, and market behavior of a specific industry.