An Efficient Allocation of Risk Occurs When Those Most Willing

question 57

True/False

An efficient allocation of risk occurs when those most willing to bear risk insure those who are least willing to bear risk.

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Definitions:

Gain Contingencies

Possible gains or income that a business might receive, contingent upon future events that can't be predicted with certainty.

Footnotes

Supplementary notes at the bottom of financial statements providing additional detail about data or items on the statements.

Off-Balance-Sheet Financing

A form of financing in which companies do not record certain assets or liabilities on the balance sheet to improve financial ratios and maintain compliance with debt covenants.

Current Liability

This represents a company's debts or obligations that are expected to be paid off within a year, including accounts payable, short-term loans, and accrued expenses.