A Lender Usually Knows Less About the Creditworthiness of a Borrower

question 53

Multiple Choice

A lender usually knows less about the creditworthiness of a borrower than the borrower does.This is an example of:

• A)Opportunistic behavior
• B)Economies of scale
• C)Diminishing marginal returns
• D)Information asymmetry

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Definitions:

Budget Performance Report

A report comparing the actual financial performance with the planned or budgeted amounts, often highlighting variances for analysis.

Cost Center

A business division that incurs costs but directly does not generate revenues, its performance being measured through cost control.

Level of Management

The different stages or tiers in an organization's hierarchy, each with specific responsibilities, ranging from top executives to middle managers to front-line supervisors.

Responsibility Accounting

The process of measuring and reporting operating data by areas of responsibility.