How net worth is related to investment of a company? Is net worth effects adverse selection of a company? If it effects adverse selection then how this adverse selection can be reduced? Describe other factors which cause adverse selection in financial institutes? Give at least 4 remedies to reduce adverse selection.
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The answers to the following questions are given below:
Explanation:
- If the net worth of a company is more, then it will be able to invest more and produce better products which will ultimately increase the sales of a company. Hence net worth is extremely crucial for investment of a company.
- Yes, the adverse selection effects the net worth of a company.
- To reduce the adverse selection, it should be ensured that their is no improper information between the buyer and the seller. The sellers should be properly given product knowledge. Coverage should not be provided to people with existing health conditions. The product quality should also be ensured to reduce adverse selection.
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